IFRS vs VAS: Differences and Impacts on Financial Reporting & Corporate Taxation

Starting from July 1, 2025, Vietnam’s roadmap for adopting IFRS (International Financial Reporting Standards) officially enters its implementation phase. This is not merely a technical change in accounting standards but a transformative shift that will significantly affect the preparation of financial statements, profit presentation, and—most importantly—the determination of taxable income.

1. VAS – Vietnamese Accounting Standards: Closely Aligned with Taxation

Under VAS (Vietnamese Accounting Standards), the current financial reporting system is designed primarily to meet management and tax requirements. Specifically:

• Companies must clearly reconcile the difference between accounting profit and taxable income.
• Financial statements prepared under VAS serve as the primary reference for the tax authority in verifying corporate income tax (CIT) obligations.

This alignment creates a “common language” between businesses and tax authorities, helping minimize discrepancies between accounting profit and tax profit. However, it also means that VAS leans more toward tax compliance rather than providing a true and fair view of financial performance, which is the ultimate objective of IFRS.

2. IFRS – International Standards: Emphasizing “Substance over Form”

In contrast, IFRS emphasizes the principle of substance over form, prioritizing the faithful representation of a company’s financial position and performance over rigid compliance with legal formats.

Key differences include:

• Fair value measurement of assets instead of historical cost depreciation.
• Revenue recognition based on performance obligations rather than solely on invoices or documentation.
• Comprehensive coverage of financial instruments, derivatives, insurance contracts, and options—areas not yet fully addressed under VAS.

👉 This raises a critical question: Will taxable income in Vietnam be determined under IFRS or remain governed by VAS and current tax law?

At present, regulators have not provided a definitive answer. As a result, most multinational corporations and listed companies in Vietnam are maintaining a dual reporting system:

• VAS for tax compliance,
• IFRS for international investors and parent company consolidation.

3. Business Impacts: Opportunities and Challenges

4. Increased Workload

Companies are required to prepare two separate sets of financial statements, adding significant pressure on accounting, internal audit, and tax teams.

1. Conversion Costs

• Upgrading accounting software and ERP systems to handle IFRS data.
• Training finance, accounting, and tax personnel in new recognition and disclosure rules.
• Adjusting internal control processes to mitigate risks of data inconsistencies.

2. Tax Risk Management

• Sole reliance on IFRS may expose companies to tax assessments or disputes due to differing definitions of taxable income.
• Dual reporting ensures:
  • Transparency with international investors,
  • Full compliance with Vietnamese tax law,
  • Reduced exposure to tax audits during the transition period.

3. Conclusion & Recommendations

The transition to IFRS is not just a change in accounting language—it entails significant challenges across taxation, systems, people, and risk management.

During the initial phase (2025–2030), the safest approach is to maintain parallel VAS and IFRS reporting.

Businesses should proactively:

• Develop a transition roadmap: identify high-impact IFRS standards (e.g., revenue recognition, fixed assets, financial instruments).
• Train multidisciplinary teams: not only accountants but also tax, legal, and internal audit departments.
• Engage with experts: collaborate with accounting firms, independent auditors, and tax advisors to avoid compliance pitfalls.

In short, IFRS will serve as the “passport” for Vietnamese businesses to integrate into global markets, while in the short term, VAS remains the “legal shield” ensuring compliance with domestic tax obligations. Only when Vietnam’s tax framework is harmonized with IFRS can companies fully transition to a single reporting standard.