In order to operate and manage the financial problems of the business, each country will normally have a certain accounting standard. In Vietnam, VAS is used for all types, regardless of enterprise’s origin, industry sector or charter capital. However, for some foreign enterprises when investing in Vietnam, the asynchronous application of accounting standards of companies in Vietnam and parent companies (overseas investors) sometimes makes it difficult for businesses to convert, consolidate financial statements in accordance with a common standard for reporting to the parent company. This article will help you better understand the Vietnamese VAS system.
What is VAS ?
VAS, also known in full as Vietnam Accounting Standards, is a system of standards issued to regulate as well as explain the content on financial statements. Currently, the Ministry of Finance is the agency issuing and managing the VAS system. VAS guides the presentation of indicators on financial statements such as inventory, fixed assets, tangible assets, etc. VAS currently has 26 standards, which became fully promulgated in 2005 and built based on international accounting standards IAS / IFRS to better suit the characteristics of Vietnam’s economy.
Accounting standards are very important not only for the Vietnamese economy but also for other countries in the world. Each country applies its own standard system, but in short, the same goal is to help the state manage businesses easily. Accounting standards also help businesses review and determine whether the business is complying with the regulations on each accounting standard.
Structure of VAS
The current accounting standards system has 26 standards, first issued in 2000 and then supplemented in 2005, namely:
Phase 1: Includes 4 standards issued on December 31st, 2001
- KTVN Standard No. 2 – Inventory
- KTVN Standard No.3 – Tangible fixed assets
- KTVN Standard No. 4 – Intangible fixed assets
- KTVN Standard No. 14 – Revenue and other income
Phase 2: Includes 6 standards issued on December 31st, 2002
- KTVN Standard No. 1 – General Standard
- KTVN Standard No. 6 – Renting property
- KTVN Standard No. 10 – Effects of exchange rate changes
- KTVN Standard No. 15 – Construction contract
- KTVN Standard No. 16 – Borrowing costs
- KTVN Standard No. 24 – Cash flow statement
Phase 3: Includes 6 standards issued on December 31st, 2003
- KTVN Standard No. 5 – Investment in real estate
- KTVN Standard No. 7 – Investments in affiliated companies
- KTVN Standard No. 8 – Financial information on LD capital contributions
- KTVN Standard No. 21 – Presentation of financial statements
- KTVN Standard No. 25 – Consolidated financial statements and accounting for investment in subsidiaries
- KTVN Standard No. 26 – Information on stakeholders
Phase 4: Includes 6 standards issued on December 31st, 2005
- KTVN Standard No. 17 – Corporate Income Tax
- KTVN Standard No. 22 – Additional presentation of financial statements of banks and similar financial institutions
- KTVN Standard No. 23 – Events arising after the end of the annual accounting period
- KTVN Standard No. 27 – Mid-year financial statements
- KTVN Standard No. 28 – Department Report
- KTVN Standard No. 29 – Changes in accounting policies, accounting estimates and errors
Phase 5: Includes 4 standards issued on December 28th, 2005
- KTVN Standard No. 11 – Business consolidation
- KTVN Standard No. 18 – Provisions, Assets and Potential Liabilities
- KTVN Standard No. 19 – Insurance policy
- KTVN Standard No. 30 – Return on Stock
In order to be internationally suitable and to help foreign investors when investing in Vietnam, and to not be too different in applying accounting standards between Vietnam and the country where investors are national, Vietnamese accounting standards are built on the basis of international accounting standards IASC. This also makes it easy for investors to agree on a common report that is convenient for management, although currently Vietnam’s accounting standards are 26 standards while international standards are applying 38 standards. Although Vietnamese accounting standards are not as complete as the international standard system, this is not a big difference that can make investors afraid to conduct business activities in Vietnam.
How VAS is built and how does VAS help businesses?
Vietnamese accounting standards are built on the balance between the management ability of competent agencies and close to the development rate of the Vietnamese economy. Therefore, the standard is built briefly and clearly to help businesses and management agencies conveniently apply. Each standard will consist of 2 items: general regulations and specific standards’ presentation, the presentation of each standard is the basis for the accounting department of each enterprise to apply when presenting the criteria on the accounting books, financial statements of the enterprise, and also the basis for a reconciliation audit when performing its audit work.
As mentioned at the beginning of the article, VAS is considered as the source document that businesses rely on to operate their own internal accounting system, management agencies rely on standards to monitor the compliance of enterprises. VAS is currently presented quite clearly, so it is also a factor that helps managers who do not have deep accounting skills to still understand and thereby monitor the operation of the internal accounting system.
The construction of VAS based on international accounting standards is also advantageous, although there is a difference in the number of standards of Vietnam compared to the world. However, with the similarity in the presentation and application of standards between Vietnam and the world, it more or less creates certain similarities between the economies of different countries, creating favorable conditions for investors when doing business in Vietnam. With the trend of globalization and integration, the addition to make the Vietnam’s accounting standards system to be similar and complete with international accounting standards is something that Vietnamese regulators are considering in the future, with the desire to create favorable conditions for Vietnamese enterprises when integrating as well as for domestic investors themselves, in addition to entering Vietnam.