IFRS and VAS in Vietnam: The 2026 Guide.

• Statement of financial position (balance sheet)
• Statement of profit or loss and other comprehensive income
• Statement of changes in equity
• Statement of cash flows
• Notes to financial statements
• Comparative information

IAS 1 allows expenses to be presented on the face of a statement of profit or loss either by nature or by function.

• Balance sheet
• Income statement
• Cash flows statement
• Notes to financial statements

Changes in equity are disclosed in the notes on owners’ capital under VAS.

Companies reporting under VAS are required to apply the standardised chart of accounts and financial statements format. VAS requires expenses to be presented by function on the face of the statement of profit or loss and to be disclosed by nature in the notes.

Disclosure of changes in financing-related liabilities must occur apart from changes in other assets and liabilities.

Cash flows from hedging activities are classified as investment activities except when they are for trading purposes (which are classified as operating activities) or when a contract is accounted for as a hedge of an identifiable position. In this case, the cash flows of the contract are classified in the same manner as the cash flows of the position being hedged.

IAS 21 provides general guidelines on the initial recognition of foreign currency transactions and subsequent measurement for items in foreign currency.

Enterprises determine an accounting currency based on prescribed criteria and administrative approval. In that case, there is no requirement to notify the tax office.

Circular 99 provides updated guidance on exchange rates for foreign currency transactions and the conversion of financial statements prepared in a foreign accounting currency into Vietnamese Dong.

IAS 24 states that the following are not related parties:

• Two entities simply because they have a director or other member of key management personnel in common, or because a member of key management personnel of one entity has significant influence over the other.
• Two joint venturers simply because they share joint control of a joint venture.
• Providers of finance, trade unions, public utilities and departments and agencies of a government that do not control, jointly control or significantly influence the reporting entity simply by their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process).
• A customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business simply by the resulting economic dependence. (IAS 24.11)

• A company is engaged in capital transfers, or receipts of capital transfer, of at least 25% of the contributed capital in the tax period with an individual who manages or controls the company or who has family relationships.
• A company is engaged in borrowing or lending at least 10% of the contributed capital at the time of transaction with an individual who manages or controls the company or has family relationships.
• The two businesses are operated or controlled in terms of human resources, finances and business operations by individuals who are close members of a family. (Decree 132, Article 5)

Decree 132/2020/ND-CP states that the following are still considered related parties:

• Two enterprises have more than 50% of the management board members in common, or have the same member of the management board with the right to decide on financial policies or business activities appointed by a third party.
• Two enterprises are considered related parties if they enter into a transaction of borrowing or lending at least 25% of the owner’s contributed capital, equivalent to more than 50% of the company’s total mid- and long-term loans at the time of the transaction. (Decree 132, Article 5)

IFRS 15 requires a five-step process to be applied before revenue can be recognised:

• Identify the contract with a customer.
• Identify the separate performance obligations in the contract. Performance obligations are promises in a contract to transfer distinct goods or services to a customer.
• Determine the transaction price. The transaction price is the amount of consideration an entity expects to be entitled to in exchange for transferring promised goods or services to a customer.
• Allocate the transaction price to each performance obligation based on the relative stand-alone selling prices of each distinct good or service promised in the contract.
• Recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer. (IFRS 15:7)

A number of the requirements under IFRS 15 have been included in VAS and Circular 99, such as allocating revenue to free goods sold in a bundle and deferring revenue to match subsequent free goods under loyalty programmes. Revenue is recognised when risks and rewards are transferred to the buyer.

VAS 14 provides five conditions for recognising revenue from the sale of goods and four conditions for recognising revenue from the provision of services.

VAS 15 provides guidance on recognising revenue from construction contracts.

Additionally, Circular 99 provides detailed accounting guidance on revenue recognition for real estate and traditional customer programmes, considering variable consideration in construction contracts.

• Initial recognition of goodwill, assets and liabilities.
• Investments in subsidiaries, associates and joint ventures if control over timing exists.
• Taxable temporary differences related to undistributed profits unless control over timing exists and a reversal is probable.

A deferred tax asset is recognised for deductible temporary differences, subject to the following conditions:

• If it is probable that taxable profit will be available against which the deductible temporary differences can be utilised.
• Except when the deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and does not affect accounting or taxable profits.
• Additionally, for deductible temporary differences arising from investments in subsidiaries, branches, associates and interests in joint arrangements, it is recognised only to the extent that the temporary difference will probably reverse in the foreseeable future and taxable profit will be available.

Under VAS 17, deferred tax liability is recognised for all taxable temporary differences, except when arising from the initial recognition of an asset or liability in a transaction that does not affect profit. VAS 17 remains silent on temporary differences related to business combinations and goodwill.

Circular 202 supplements and requires that a deferred tax liability is recognised for all taxable temporary differences unless the deferred tax liability arises from the initial recognition of an asset or a liability of a transaction that does not affect accounting profit or taxable profit (or tax loss) at the time of the transaction.

VAS 17 also requires the recognition of deferred tax assets for all deductible temporary differences with exceptions similar to IAS 12, but is silent on temporary differences arising from a business combination.

IAS 16 allows two accounting models: the cost model and the revaluation model. (IAS 16.29 & 31).

IAS 16 requires an entity to determine the depreciation charge separately for each part of a PPE item with a cost that is significant in relation to its total cost.

Under IAS 16, the residual value and useful life are required to be reviewed at least at each financial year-end and, if there is any change, it will be accounted for as a change in accounting estimate.

Only the cost model is allowed under VAS 3. (VAS 3.13)

VAS 3 does not require a separate depreciation charge for each significant part of PPE.

VAS 3 requires the review of useful life but is silent on the review of residual value at year end.

The depreciable amount of an intangible asset with a finite useful life shall be allocated systematically over its useful life. IAS 38 does not impose any limit on the useful life. (IAS 38.97, IAS 38.88)

IAS 38 requires an entity to perform an impairment test for intangible assets in accordance with IAS 36. (IAS 38.111, IAS 36.10)

• Estimated useful life is more than one year.
• Enterprises may define their own capitalisation threshold for intangible assets in their internal accounting policies.

Under VAS 4, only the cost model is allowed, and the amortisation period is up to 20 years. (VAS 4.53, 4.54)

VAS 04 does not provide a comprehensive impairment testing framework comparable to IAS 36; impairment losses are recognised only when there is evidence of a permanent decline in value.

Subsequently, an entity shall choose either the fair value model or the cost model and shall apply it consistently to all of its investment property. (IAS 40.56)

Circular 99 provides additional guidance for investment properties held for capital appreciation.

Investment properties held for capital gains are not depreciated but are subject to impairment assessment when there is evidence of a permanent decline in value.

Impairment losses are recognised in profit or loss (commonly as cost of sales for real estate entities) when the loss is reliably measurable.

However, the entity is not allowed to recognise unrealised gains arising from changes in market value.

All assets within the IAS 36 scope are tested for impairment where there is an impairment indicator. Impairment indicators include:

• External indicators (significant adverse changes in the technological, market, economic or legal environment, or increases in market interest rates).
• Internal indicators (obsolescence or physical damage of an asset, or evidence from internal reporting that the economic performance of an asset is, or will be, worse than expected).

Circular 99 requires investment properties held for capital appreciation not to be depreciated, but to be assessed for impairment when there is evidence of a permanent decline in value, without providing detailed guidance.

Under IFRS 16, lessees have to recognise a lease liability IFRS 16 requires lessees to recognize a lease liability representing future lease payments and a ‘right-of-use asset’ for nearly all lease contracts.

Lessees will report interest expenditure associated with the lease liabilities and right-of-use asset depreciation in the income statement.

• Finance leases (that transfer substantially all the risks and rewards incidental to ownership and give rise to asset and liability recognition by the lessee and a lease receivable by the lessor).
• Operating leases (that result in expense recognition by the lessee, with the asset still being recorded in the lessor’s books).

Finance lease assets are recorded as assets on the balance sheet and are depreciated accordingly, and depreciation expense is recorded in the statement of business activities.

VAS 06 and Circular 99 do not adopt the IFRS 16 right-of-use model.

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

A fair value measurement requires management to determine four things:

• The particular asset or liability that is the subject of the measurement.
• The highest and best use for a non-financial asset.
• The principal (or most advantageous) market.
• The valuation technique.

IFRS 13 establishes a fair value hierarchy categorised into three levels to provide inputs to valuation techniques used to measure fair value. The hierarchy, from highest priority, is as follows:

• Level 1: Quoted prices in active markets.
• Level 2: Inputs that are observable for the asset or liability, either directly or indirectly.
• Level 3: Inputs that are unobservable for the asset or liability.

Circular 99 provides limited and transaction-specific guidance on fair value measurement, without establishing a fair value hierarchy, valuation techniques or consistent measurement principles. In detail:

• Listed shares: fair value determined based on quoted prices on organised securities markets.
• Shares traded on UPCOM: measured based on observable transaction prices or prices on the transaction date where available.
• Unquoted shares: measured at transaction price or cost and subsequently carried at cost less impairment, rather than re-measured at fair value.

IAS 32 – Financial instruments: Presentation.

IFRS 7 – Financial instruments: Disclosures IFRS 9 introduces a new model for recognising impairment losses – the expected credit losses (ECL) model.

IFRS 9 has three classification categories for debt instruments:

• Amortised cost
• Fair value through other comprehensive income (FVTOCI)
• Fair value through profit or loss (FVTPL)

However, Circular 99 provides limited, rule-based guidance on the presentation and accounting of certain financial instruments, such as convertible bonds and treasury shares, but does not establish an integrated financial-instrument framework comparable to IFRS.

VAS has not adopted the ECL model; instead, provisioning under the guidance of Circular 48/2019/TT-BTC is still applied.

Investments in shares and debt instruments are classified by nature and purpose (e.g. trading investments, long-term investments, investments in subsidiaries, associates and joint ventures) rather than under an IFRS-style business-model assessment.

These investments are generally carried at historical cost and are only written down when there is evidence of decline in value; fair-value remeasurement is not applied.

• The hedging relationship consists only of eligible hedging instruments and eligible hedged items.
• There is a formal designation and documentation of the hedging relationship and risk management objective and strategy at the hedge’s inception.
• The hedging relationship meets the hedge effectiveness requirements.

• Provision for trade accounts receivable is based on the ageing of the balance using a pre-determined percentage for each ageing category amount.
• Provision for investment securities is made by comparing the carrying and market values.
• Provision for long-term equity investments is based on the loss incurred and recorded under the investee’s equity.

In addition, there is no guidance for hedge accounting in VAS.

When an entity prepares its separate financial statements, investments in subsidiaries, associates and joint ventures are accounted for either:

• At cost
• At fair value through profit and loss (following IFRS 9 Financial Instruments)
• Using the equity method as described in IAS 28 Investments in Associates and Joint Ventures. (IAS 27(2011).10)

Under Vietnamese regulations, entities prepare separate financial statements as the primary statutory financial statements. Consolidated financial statements are required only when control criteria are met.

In separate financial statements, investments in subsidiaries, associates and joint ventures are accounted for using the cost method, being recorded at original cost (purchase price plus directly attributable expenses) and subsequently adjusted only for provisions for decline in value where applicable.

• The entity is a wholly-owned or partially-owned subsidiary whose minority shareholders, including those without voting rights, are informed about and do not object to the non-consolidation of financial statements.
• The entity’s securities, including debt and equity, are not traded publicly.
• The entity has not submitted, nor is it in the process of submitting, its financial statements to a securities commission or similar regulatory body for issuing any class of instruments in a public market.
• The entity’s ultimate or intermediate parent publishes consolidated financial statements that are available for public use and comply with IFRS, wherein the subsidiaries are either consolidated or valued at fair value through profit or loss in accordance with IFRS 10.

Additionally, an entity that meets the definition of an investment entity under IFRS 10 can account for its subsidiaries at fair value through profit or loss as per IFRS 9 rather than presenting consolidated financial statements.

Consolidated financial statements are generally required when control exists. Exemptions from consolidation are limited and rule-based, and are not aligned with IFRS 10 exemption criteria.

An entity may be exempt from preparing consolidated financial statements mainly when its parent entity prepares consolidated financial statements in accordance with VAS that include the reporting entity, subject to strict regulatory conditions.

VAS 25 and Circular 202 do not recognise the concept of an investment entity, and therefore do not permit measurement of subsidiaries at fair value through profit or loss in lieu of consolidation.

In general, assets (or disposal groups) held for sale are not depreciated, are measured at the lower of carrying amount and fair value less costs to sell, and are presented separately in the statement of financial position.

Non-controlling interest (NCI) is measured either at the NCI’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets or at fair value.

Under IFRS 3, contingent consideration is recognised at its fair value at the date of acquisition. The classification of contingent consideration as either a liability or equity is determined with reference to the guidance in IAS 32.

Only the proportionate interest method is allowed under Circular 202.

Under VAS 11, contingent consideration is included in the cost of a business combination at the acquisition date only when payment is probable and reliably measurable. Subsequent adjustments to contingent consideration are not remeasured at fair value, and are accounted for based on their substance, which may result in adjustments to the cost of combination, goodwill, or profit or loss.

For separate financial statements, the accounting for investments in associates and joint ventures is governed by IAS 27.

The equity method is required for accounting for an investment in an associate or a joint venture, except in the following circumstances:

• The entity is a parent that is exempt from preparing consolidated financial statements under IFRS 10.4(a) and other exempted circumstances.
• When an investment in an associate or a joint venture is held by institutional investors, the entity may choose to measure investments at fair value through profit or loss under IFRS 9.
• When a portion of an investment in an associate is held indirectly by an institutional investor, the entity may choose to measure that portion of the investment in the associate at fair value.

VAS 7 and VAS 8 govern the accounting for investments in associates and joint ventures under Vietnamese Accounting Standards.

In separate financial statements, such investments are accounted for using the cost method only.

In consolidated financial statements, investments in associates and joint ventures are generally accounted for using the equity method, with limited exceptions where cost may be applied due to long-term restrictions.

Post-employment benefits: classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan.

Termination benefits: recognised as a liability and expense at the earlier of when the entity can no longer withdraw the offer of those benefits and when the entity recognises restructuring costs within the scope of IAS 37 that involve the payment of those benefits.

• Receives goods or services from the supplier of those goods or services (including an employee) in a share-based payment arrangement.
• Incurs an obligation to settle the transaction with the supplier in a manner other than by exchanging a fixed amount of cash or another financial asset for a fixed number of equity instruments of the entity.

In such transactions, the entity either:

• Issues equity instruments (including shares or share options).
• Incurs liabilities for cash or other assets of the entity based on the price of the entity’s shares or other equity instruments of the entity.

• Interest expense: calculated using the effective interest method outlined in IFRS 9.
• Finance charges: related to finance leases recognised in line with IAS 17 Leases.
• Exchange differences: from foreign currency borrowings to the extent that they are considered an adjustment to interest costs.

• It does not mandate the use of the effective interest method for calculating interest expenses.
• It does not address exchange differences resulting from foreign currency borrowings as part of borrowing costs.