Guide to Converting Financial Statements (F/S) from Vietnamese Accounting Standards (VAS) to International Financial Reporting Standards (IFRS)

Objective:

1. 
   

   To consolidate the parent company's financial statements using International Financial Reporting Standards (IFRS), while the subsidiaries still apply Vietnamese Accounting Standards (VAS).

   
   


2. 
   

   To help businesses prepare their opening balances as they gradually adopt IFRS.

   
   

Here are the steps to convert your financial statements to IFRS:

Step 1: Compare and Identify Differences Between VAS and IFRS and Develop a Conversion Plan

The company needs to understand the differences between VAS and IFRS to determine how these differences will affect its financial statements when converted to IFRS. Some differences may need to be applied, while others may not, depending on their relevance.

This step will help the business plan the detailed tasks for departments involved in gathering and processing data for the conversion of financial statements.

Reference: Descriptions of the differences between the two standards can be found here.

Step 2: Build an IFRS-Compatible Financial Statement Template Tailored to Your Business

IFRS-compliant financial statements include a wide range of items, but they can be simplified depending on the company's size, industry, development stage, and types of transactions. However, compliance must still be ensured.

To do this, businesses need to:

• Carefully review IFRS standards related to presentation and disclosure requirements.

• For businesses converting to IFRS for the first time, refer to IFRS 1 for specific guidance.

• Reference financial statements from similar businesses in the same industry.

• Use an IFRS checklist to ensure all required presentation and disclosure items are covered.

Contact Crowe Vietnam for the most up-to-date IFRS checklist.

Step 3: Build a Detailed Account System for IFRS Financial Statements

Based on the IFRS financial statement template, the company will develop a corresponding detailed account system and assign account codes for each financial statement item to easily aggregate data from detailed accounts.

This is typically done in Excel, but some businesses may use accounting software if it supports these functions.

Step 4: Identify Journal Entries to Convert Data from VAS to IFRS

Converting data requires retrospective adjustments to determine the opening balances in IFRS. For the first year of conversion, refer to IFRS 1 for further guidance.

The conversion journal entries fall into two categories:

1. Reclassification Entries: Initially, balances from the VAS account system are temporarily transferred to the IFRS system, which may not align with the account content. Some reclassification entries may be necessary to ensure balances are transferred correctly. These entries do not affect the total assets, liabilities, revenue, or expenses, as they are only internal reclassifications.

2. Adjustment Entries: Some accounts may require adjustment entries due to differences in recognition criteria, measurement methods, and value assessments between the two standards. These adjustments will affect the total values of assets, liabilities, revenue, expenses, etc.

Additionally, businesses must gather and prepare information for detailed disclosures in the financial statements. All adjustment entries and disclosures should be supported by valid documentation.

Since this process takes significant time and effort, businesses must plan the conversion process in advance to ensure all relevant departments work together efficiently and meet deadlines.

Reference: For more details, see "Overview and System of IFRS" here.

Step 5: Populate Financial Statement Data and Complete Disclosures

Once the detailed accounts system under IFRS is finalized, businesses should aggregate the data for each financial statement item based on the template they’ve created (usually done using Excel and data link functions).

In addition, businesses must complete the presentation and disclosure of detailed information within the financial statement notes.

For the first year of conversion, refer to IFRS 1 for further instructions.

Step 6: Review and Final Check for Data Accuracy and Compliance

• Perform an overall comparison between the IFRS-based financial statements and the VAS-based financial statements to ensure all discrepancies are appropriately explained.

• Review all presentation and disclosure items based on IFRS to ensure full compliance.

By following these steps, companies can ensure a smooth transition from VAS to IFRS and maintain transparency and accuracy in their financial reporting.