Investing In Vietnam - Accounting And Auditing

Accounting Framework

Accounting Standards

There are currently 26 Vietnamese Accounting Standards (VAS) which were issued from 2001 to 2005. All standards were adopted from and primarily based on the International Accounting Standards (IAS). Key differences between IFRS and VAS include terminology, applied valuation methods or disclosure requirements due to the continuing changes and amendments to IFRS.

Vietnam is on the way to close the gap between VAS and IFRS and it is expected that full adoption of IFRS will be made by 2025.

Accounting Law and Applicable Implementation Guidance

In Vietnam, Accounting Law is the highest accounting regulation issued by the National Assembly. Various applicable implementation guidance is then issued by the Government and the Ministry of Finance (MoF) in respect of implementing a Decree or Circular, respectively.

The accounting framework in Vietnam is mainly rules based accounting rather than a principles-based one. The Vietnamese Accounting System is seen as the book keeping and financial reporting manual that provides a standard chart of accounts, financial statements template, accounting books and voucher templates, as well as detailed guidance on accounting double entries for specific transactions in each individual account.

There are industry-specific accounting guidelines for credit institutions, insurance companies, securities companies, fund managers and funds. Out of these sectors, the accounting guidelines for credit institutions are issued by the State Bank of Vietnam.

Accounting Records

• Framework: Vietnamese Accounting System

• Language: Vietnamese

• The company can use electronic documents as accounting records, but must print and file those electronic papers in hardcopy

• Records retention: five (5) years for accounting documents; ten (10) years for accounting data, accounting books and permanently for documents that are significant in term of economics, national security and defense

• Currency: Accounting records are generally required to be maintained in Vietnamese Dong (“VND”). Foreign invested entities are allowed to select and use another currency in recording transactions and maintaining their accounting records, provided that they can clearly demonstrate that the receipts and disbursements are mainly denominated in such other currency. However for statutory reporting, entities using another currency as functional currency must convert their financial statements prepared under such other currencies into VND under certain prescribed regulations

• Accounting period: The accounting period is generally 12 months in duration. The first accounting period must not be longer than 15 months from the license date. The last accounting period must also not be longer than 15 months

• Seal: Enterprises are permitted to actively decide the form, quantity and contents of their seal. The management, use and retention of the seal shall comply with the entities’ charter. The seal shall be used in the cases prescribed by law or agreed by the parties

Financial Reporting

The basic set of financial statements prepared under VAS comprises the following:

• Balance sheet

• Income statement

• Cash flow statement

• Notes to the financial statements, including a disclosure on changes in equity

An enterprise is required to appoint a Chief Accountant who must satisfy the criteria and conditions stipulated by the Law on Accounting and guiding regulations. The annual financial statements must be approved by the Chief Accountant and the Legal Representative and a copy of the financial statements must be submitted to the local authorities within 90 days of the end of the financial year.

For those enterprises operating in export processing zones (EPZs) or industrial zones (IZs), Annual Financial Statements may be required to be filed with the management board of the respective EPZs or IZs.

Audit Requirements

Vietnam has issued 47 auditing standards which are primarily based on International Standards of Auditing with certain customizations to fit Vietnam’s circumstances.

The annual financial statements of all foreign-invested entities must be audited by an independent auditing company operating in Vietnam. Audited annual financial statements must be completed within 90 days of the end of the financial year. These financial statements should be filed with the applicable licensing body, Ministry of Finance, local tax authorities, Department of Statistics and other relevant authorities.

Audit contracts should be signed with the independent auditing companies no later than 30 days before the end of the enterprise’s fiscal year. The enterprise is legally responsible for providing timely and sufficient information, as well as explanations to the auditor.

There is a requirement to rotate audit firms after five consecutive years for credit institutions operating in Vietnam. For entities other than credit institutions, the signing auditors are required to be rotated off after three consecutive years.

Heading to International Financial Reporting Standards (IFRS)

There are certain key differences between IFRS and VAS, mainly including terminology, accounting treatment and presentation and disclosure requirements. It should be noted that IFRS has been changing continuously with a number of revisions and amendments made to date. However, there are still a number of key accounting standards such as regarding financial instruments and impairment of assets that have not been issued yet in Vietnam.

It should be noted that Accounting Law 2015 introduces the concept of Fair Value for the first time, with further specific guidance expected to be issued by the MoF in the near future.

Vietnam is expected to align with IFRS in its efforts to enhance comparability and improve transparency. Businesses should put in place accounting-auditing human resources as well as upgrading technologies, systems and processes which are all decisive factors in successfully adopting IFRS.

Source RMS Vietnam

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