VAS vs. IFRS in Vietnam: Bridging Local Practice with Global Demands

Vietnam’s rapid rise as an investment hub has made its accounting standards more important than ever. Foreign companies now face a choice between two systems that work very differently. Vietnamese Accounting Standards (VAS) are based on rules, historical costs, and tax reporting principles.

On the other hand, the International Financial Reporting Standards (IFRS) rely on principles, fair value, and global consistency. The gap between IFRS and VAS often forces multinational firms to undertake time-consuming reconciliations, which increase costs.

Understanding this VAS vs IFRS comparison is key to Vietnam’s next stage of growth. In today’s article, we will look at opportunities, challenges, and what steps can help bridge the differences.

What are the Vietnamese Accounting Standards (VAS)?

The Vietnamese Accounting Standards (VAS) form the foundation of Vietnam’s financial reporting system and play a central role in shaping how businesses present their performance to regulators, investors, and other stakeholders.

Established by the Ministry of Finance, VAS reflects Vietnam’s focus on maintaining consistency and compliance within a fast-growing economy that is increasingly integrated with global markets.

Core features of the VAS

VAS is built on a rules-based system that relies heavily on historical cost accounting. The system prioritizes objectivity and compliance with tax regulations, ensuring that reported figures align closely with statutory requirements.

For domestic enterprises, the structure provides clarity and a standardized framework for financial reporting. However, it also reveals some important limitations when companies operate in more complex business environments or need to meet international investor demands.

One characteristic of VAS is its strong connection to Vietnam’s tax laws. Financial statements under VAS are designed not only to reflect the performance of a business but also to serve as the basis for tax calculations.

The 26 Vietnamese Accounting Standards

Between 2001 and 2005, the Ministry of Finance issued 26 Vietnamese Accounting Standards, covering various areas of accounting and reporting. These include:

Phase 1 – Decision 149/2001/QD-BTC (04 standards)⁽¹⁾

• VAS 02 on Inventories
• VAS 03 on Tangible fixed assets
• VAS 04 on Intangible fixed assets
• VAS 14 on Revenue and other income

Phase 2 – Decision 165/2002/QD-BTC (06 standards)⁽²⁾

• VAS 01 on General standard
• VAS 06 on Leases
• VAS 10 on Effects of changes in foreign exchange rates
• VAS 15 on Construction contracts
• VAS 16 on Borrowing costs
• VAS 24 on Cash flow statements

Phase 3 – Decision 234/2003/QD-BTC (06 standards)⁽³⁾

• VAS 05 on Investment properties
• VAS 07 on Investments in associates
• VAS 08 on Financial information about joint ventures
• VAS 21 on Presentation of financial statements
• VAS 25 on Consolidated financial statements and accounting for investments in subsidiaries
• VAS 26 on Related party disclosures

Phase 4 – Decision 12/2005/QD-BTC (06 standards)⁽⁴⁾

• VAS 17 on Income taxes
• VAS 22 on Additional presentation of financial statements for banks and similar financial institutions
• VAS 23 on Events after the balance sheet date
• VAS 27 on Interim financial reporting
• VAS 28 on Segment reporting
• VAS 29 on Changes in accounting policies, estimates, and errors.

Phase 5 – Decision 100/2005/QD-BTC (04 standards)⁽⁵⁾

• VAS 11 on Business combinations
• VAS 18 on Provisions, contingent assets, and contingent liabilities
• VAS 19 on Insurance contracts
• VAS 30 on Earnings per share.

Together, these 26 standards form the official VAS framework still applied in Vietnam today.

Limitations of the VAS

While the Vietnamese Accounting Standards ensure compliance and consistency for local companies, they show clear limitations in the VAS and IFRS comparison. This is the key difference between VAS and IFRS.

Unlike the International Financial Reporting Standards (IFRS), which emphasize transparency, fair value measurement, and comparability across borders, VAS does not provide the same scope for capturing the true economic substance of business transactions.

For example, VAS relies on historical cost, which may understate the current value of assets. On the contrary, IFRS permits fair value assessments that reflect market realities. Similarly, VAS offers little guidance on areas such as financial instruments, consolidated reporting, and complex contracts.

These gaps become especially significant when examining IFRS vs VAS adoption in Vietnam. Thus, multinational corporations often face costly reconciliations between VAS-based statements and IFRS requirements to satisfy global investors and regulators.

Despite its limitations, VAS remains a crucial part of Vietnam’s financial infrastructure. Nevertheless, bridging the VAS and IFRS divide is essential for Vietnam to strengthen its role as a regional investment hub.

What are the International Financial Reporting Standards (IFRS)?

The International Financial Reporting Standards (IFRS) are a globally recognized set of accounting principles that promote consistency and comparability across jurisdictions. Issued by the International Accounting Standards Board (IASB), IFRS has become the reference point for companies that want to build investor trust and expand internationally.

More than 140 jurisdictions, including the European Union, Singapore, and Australia, apply IFRS either fully or with adaptations, making it the most widely adopted framework worldwide. In the context of VAS vs IFRS, the global reach highlights the need for Vietnam to understand and prepare for integration with international standards.

Core features of the IFRS

IFRS follows a principle-based approach, with a focus on capturing the economic substance of transactions rather than adhering strictly to prescriptive rules. Its defining characteristic is the use of fair value measurement, where assets and liabilities are often reported based on current market conditions.

Furthermore, IFRS also places strong emphasis on disclosure. For instance, companies must explain the judgments and assumptions behind their numbers.

A global benchmark for reporting

The adoption of IFRS has streamlined financial communication across industries and geographies. Businesses that apply a single set of standards avoid the complexity of preparing multiple reports under different national rules.

At the same time, investors benefit from improved comparability. Major stock exchanges in Europe and Asia already require IFRS compliance, demonstrating how it functions as an entry point to international capital markets.

Relevance to Vietnam

As stated, the difference between IFRS and VAS often creates costly reconciliation work for multinational corporations operating in Vietnam. Moving toward IFRS would ease these challenges and enhance Vietnam’s attractiveness as an investment destination.

As the country continues to position itself as a regional hub, IFRS adoption represents more than an accounting upgrade. It signals a commitment to global best practices, investor confidence, and long-term competitiveness.

VAS vs IFRS key differences and comparison

The VAS vs IFRS comparison reflects two different approaches to how businesses should communicate their financial health. Below are the main areas where the two frameworks differ:

Asset measurement

• VAS: Assets are recognized and maintained at historical cost, meaning they are reported at their purchase price regardless of market fluctuations. The method aligns with Vietnam’s tax-focused environment but can lead to outdated valuations. For instance, a property purchased 10 years ago is still shown at its original cost even if its market value has doubled.
• IFRS: The regulations emphasize fair value, updating asset and liability values to reflect current market conditions. They provide investors with more relevant information about the real worth of a company, particularly in sectors such as real estate and finance.

Principles versus rules

• VAS: A rules-based framework that prescribes detailed treatments for transactions. It often lacks the flexibility needed for complex or innovative business models.
• IFRS: Principle-based, which means it provides broad guidelines rather than strict rules. Accountants exercise judgment to present the economic substance of transactions and foster adaptability to global business practices.

Coverage of specialized standards

• VAS: Limited in scope, with no comprehensive standards on important areas such as financial instruments, revenue recognition for complex contracts, or share-based payments.
• IFRS: Offers extensive coverage, including IFRS 9 on financial instruments, IFRS 15 on revenue, and IFRS 2 on share-based payments. These standards allow companies to report more accurately on complex financial products and cross-border activities.

Presentation and disclosure

• VAS: Requires companies to follow rigid templates for financial statements with relatively limited disclosure. Although they support uniformity, the amount of context provided to investors and lenders is reduced.
• IFRS: Permits flexible formats and requires detailed disclosures about assumptions, risks, and judgments. The same system makes it easier for analysts and investors to compare companies across different markets.

Taken together, the difference between VAS and IFRS demonstrates why international adoption is increasingly viewed as essential for Vietnam. IFRS reporting offers transparency, investor confidence, and comparability, while VAS remains practical for tax alignment and domestic use.

The current IFRS vs VAS adoption in Vietnam

Vietnam’s financial reporting system is undergoing one of its most important transformations. The conversation on IFRS vs VAS in Vietnam has moved from theory to practice with the Ministry of Finance setting a clear adoption roadmap.

Under Decision 345/QD-BTC⁽⁶⁾, issued in March 2020, Vietnam approved a phased plan to bring its financial reporting standards closer to global benchmarks.

Phase 1: Voluntary adoption (2022–2025)

During the first stage, large enterprises, foreign-invested companies, and state-owned enterprises are encouraged to prepare consolidated financial statements under IFRS on a voluntary basis.

The aim is to give early adopters the opportunity to familiarize themselves with IFRS requirements, build internal capacity, and address technical challenges before any mandatory transition takes place.

Many multinational corporations with cross-border reporting obligations (e.g., Vinamilk, VIB, Vingroup, etc.) have already joined this phase.

Phase 2: Compulsory adoption (Post-2025)

After 2025, IFRS adoption will become compulsory for consolidated financial statements of certain groups, particularly listed companies and large enterprises. At the same time, Vietnam plans to introduce the Vietnamese Financial Reporting Standards (VFRS), a local version of IFRS adapted for smaller and medium-sized businesses.

Implications for businesses

In short, IFRS vs VAS adoption in Vietnam is no longer a distant prospect. The roadmap is underway, and the success of this transition will play a major role in how Vietnam strengthens its credibility in international capital markets.

However, it also means that, for several years, a dual system will remain in place. As a result, businesses will need to manage the coexistence of VAS for statutory and tax purposes and IFRS for investor communication and global consolidation.

The outcome is both an opportunity and a challenge. Early adoption positions companies to attract foreign capital, but it also demands investment in training, systems, and resources.

Conclusion and next steps

The comparison of VAS vs IFRS in Vietnam reflects a broader question of how the country adapts to global standards to strengthen its appeal for foreign direct investment. Although VAS provides a foundation for domestic compliance and taxation, IFRS offers transparency and comparability that international investors expect.

The dual system means companies face short-term hurdles such as training costs, system upgrades, and regulatory gaps. Yet the long-term benefits of IFRS adoption outweigh these challenges.

By applying the International Financial Reporting Standards, businesses improve investor trust, gain extensive access to international capital markets, and support Vietnam’s ambition to become a regional investment hub.

The shift from VAS to IFRS brings both challenges and opportunities, and having the right support can make a decisive difference. BBCIncorp is ready to provide expert guidance on navigating Vietnam’s evolving reporting environment. Reach out to us at service@bbcincorp.com to gain the insights and solutions your business needs today.

References:

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