VAS Vs IFRS: Key Challenges Faced By FDI Finance Functions In Vietnam

As Vietnam continues to position itself as a key destination for foreign direct investment (FDI), regulatory expectations around financial reporting and compliance have increased significantly. Despite this, many FDI finance functions continue to encounter operational inefficiencies and reporting inconsistencies.

A primary driver of these challenges is the divergence between Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IFRS). Misalignment between these frameworks can result in financial discrepancies, increased compliance exposure, and additional operational burden.

1. Structural Differences Between VAS and IFRS

While VAS was initially developed with reference to IFRS, the two frameworks differ materially in their underlying approach:

• VAS is predominantly rules-based, with a strong linkage to statutory and tax compliance requirements 
• IFRS is principles-based, focused on presenting a true and fair view of financial performance and position 

These structural differences have a direct impact on recognition, measurement, and presentation of financial information.

2. Alignment with Tax Regulations Under VAS

In Vietnam, accounting under VAS is closely aligned with tax regulations:

• Accounting treatments are often influenced by tax deductibility rules 
• Reported profit is typically aligned with taxable income 

In contrast, IFRS emphasizes economic substance:

• Greater reliance on estimates and professional judgment 
• Broader application of fair value measurement 

As a result, entities frequently maintain dual sets of financial data under VAS and IFRS.

3. Key Technical Differences

These differences can create material variances in financial reporting outputs, particularly during consolidation.

4. Operational Challenges for FDI Finance Teams

In practice, FDI finance functions in Vietnam often face:

• Misalignment between internal (group) reporting and statutory reporting 
• Complexity in preparing IFRS-compliant reporting packages 
• Increased reliance on manual adjustments and reconciliations 
• Over-dependence on year-end conversion processes 

Notably, year-end conversion alone is typically insufficient to ensure data integrity and consistency.

5. IFRS Adoption in Vietnam

Vietnam is progressing toward IFRS adoption through a phased approach:

• Voluntary adoption for large corporates and FDI enterprises 
• Gradual enhancement of financial reporting transparency 

However, in the foreseeable future:

• VAS will remain mandatory for statutory and tax reporting 
• Entities will need to operate dual reporting frameworks 

6. Practical Considerations for FDI Enterprises

To address these challenges effectively, FDI entities should consider:

• Implementing dual reporting frameworks from the outset 
• Separating tax accounting from management reporting processes 
• Strengthening local technical expertise to navigate regulatory requirements 
• Aligning group reporting expectations with local statutory constraints 

A proactive approach will significantly reduce reconciliation effort and improve reporting quality.

Conclusion

The divergence between VAS and IFRS extends beyond technical accounting differences and directly impacts financial governance, reporting efficiency, and compliance risk.

FDI enterprises that proactively address these differences through structured reporting frameworks and local expertise will be better positioned to ensure accuracy, transparency, and operational efficiency.

Please contact TPM Tax Agency for tailored advisory support aligned with your business needs.

Quyen Nguyen