Companies urged to apply IFRS to take opportunity for international expansion

IFRS is widely applied in more than 120 countries and territories around the world to ensure transparency and consistency but remains unpopular with enterprises in Vietnam.

Vietnam currently applies Vietnam Accounting Standards (VAS).

The Ministry of Finance in 2020 approved a project on applying financial reporting standards in Vietnam which aims at applying IFRS and new Vietnam Financial Reporting Standards (VFRS). Accordingly, IFRS is expected to be made compulsory after 2025.

According to Phan Huu Thang, president of the Vietnam Industrial Park Finance Association (VIPFA), financial reporting and accounting are necessary for enterprises, especially those in industrial zones looking to attract foreign investment inflows.

Nguyen Thi Thuy from AudiCare Vietnam Training Centre said that financial reports which meet IFRS help increase transparency, professionalism and opportunities to compete in the global market, attract investments and expand opportunities for cheap loans as well as create favourable conditions for doing business globally.

In fact, few Vietnamese firms have thorough understandings about IFRS while there are still gaps in compliance with financial reporting standards, Thuy said.

Applying IFRS can be complicated and costly in terms of training and changes in the system and constant compliance, she pointed out. In addition, adjusting IFRS to ensure appropriateness to existing legal frameworks is not an easy job.

She pointed out that VAS has 26 standards while IFRS has 41. It might take enterprises at least three or four years of training to prepare data for their first IFRS report.

Companies should select professional consultants to improve transparency and trustworthiness for their financial reports, Thuy said.

Nguyen Chi Dung from EY Vietnam said that tax authorities tend to apply risk-based management principles in tax inspection and change their approaches in inspecting.

Around 90% of enterprises in the inspection plan are automatically selected through the risk assessment system which assesses the risk level through enterprises’ financial reports, customs declarations, banking transactions and e-invoices, he said.

The focus of 2024 tax inspection includes enterprises operating in sectors which have high risks for tax evasion such as real estate, construction, raw material trading, retail, plastic product manufacturing and trading, communication, advertising and e-commerce.

It is necessary for enterprises to improve their internal processes, comply with tax laws and regularly update tax policies, Dung said.

In addition, enterprises should improve compliance with international standards to take opportunities for international expansion.