Level of Harmonization of Vietnam Accounting Standards with Ias/ifrs on Preparation and Presentation of Consolidated Financial Statements

By Binh, Ta Quang; Giang, Nguyen Phu et al. | Academy of Accounting and Financial Studies Journal, April 2018 | Go to article overview

Level of Harmonization of Vietnam Accounting Standards with Ias/ifrs on Preparation and Presentation of Consolidated Financial Statements


Binh, Ta Quang, Giang, Nguyen Phu, Van, Tran Hong, Academy of Accounting and Financial Studies Journal


INTRODUCTION

From the last decades of the twentieth century to the present, under the influence of globalization, the process of accounting harmonization and convergence in countries around the world has taken place more and more strongly. Also following this trend, in 1999, Vietnam started to study and prepare accounting standards based on two fundermental principles: (i) based on international accounting standards and (ii) suitable for the development conditions of the Vietnamese economy, Vietnam's legal system, qualifications and experiences in accounting and auditing. By the end of 2005, 26 VASes (Vietnamese Accouting Standard) were issued. However, since being formally adopted so far, although the content has had certain backwardnesses compared to IFRS (International Financial Reporting Standard), the VAS has not been amended and supplemented yet. Especially, the accounting standards related to business harmonization and financial statement preparation are guided by accounting standards and the following guiding circulars: the Circular No. 161/2007/TT-BTC dated 31 December, 2007, including the Guidelines for Implementation of Accounting Standard No. 11-Business harmonization and Accounting Standard No. 25-Consolidated Financial Statement and Accounting for Investments in Subsidiaries. Recently, December 22, 2014, the Ministry of Finance of Vietnam has issued the Circular No. 202 promulgating the accounting regime related to the business harmonization accounting and consolidated financial statement preparation.

It could be seen that the Vietnamese enterprises nowadays still prepare and present the financial statements (FS) in general and consolidated financial statements (CFS) in particular in accordance with the VASes not amended and supplemented yet. The amendment and supplementation of VAS by approaching the IAS/IFRS according to the roadmap that the Ministry of Finance is implementing might cause problems and loss of time and effort for both companies and relevant state agencies. Based on the viewpoint that the tendency of accounting convergence with IAS/IFRS is inevitable, studying the level of harmonization of Vietnamese accounting, firstly, in terms of CFS, would help clarify the gap between Vietnamese accounting and international accounting in two aspects: accounting standard and accounting practice; since, the solutions ensuring the process of convergence with the international accounting and also compatible with the reality at Vietnam could be proposed, which is urgent as the initial viewpoint on building the VAS system declared.

LITERATURE REVIEWS

CFS is Prepared and Presented in a Variety of Forms Based on Different Integration Theories

In the viewpoint of many researchers, the principles of preparation and presenation of CFS in the countries' accounting standards and and IAS/IFRS are often based on the basis of three fundermental harmonization theories: owner benefit theory, parent company theory and entity theory. The basic content of these theories could be summarized as follows:

Owner Benefit Theory (Proportional Harmonization Theory)

The owner benefit theory concentrates on the part belonging to the parent company in the subsidiary. This theory illustrates that the parent company only purchases a portion of the subsidiary; and only this portion needs to be reflected in the CFS (Shortridge & Smith, 2007). In other words, only the assets, liabilities, revenues and expenses of the subsidiary belonging to shareholders of the parent company are presented in the CFS; not the interest belonging to the non-controlling shareholder (Pacter, 1992).

Parent Company Theory

CFS, according to the parent company theory, is also known as full harmonization. When the harmonization is implemented, all assets, liabilities, revenues and expenses of the subsidiary, regardless of whether they belong to parent company or non-controlling shareholders, are reflected in the CFS (Davis & Largay III, 2006). …

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