International Financial Reporting Standards (IFRS) Adoption in Vietnam: From Isolation to Isomorphism

Introduction

The adoption of International Financial Reporting Standards (IFRS) in developing countries is a well-known area of research. Despite its across-the-globe presence, the trajectory of adoption is not similar with developing countries. One of the major impacting factors is the pressure imposed by the lending institutions like the World Bank and the International Monetary Fund (IMF). A series of studies related to Egypt (Hassan 2008), Bangladesh (Mir & Rahaman 2005); Czech Republic, Hungary, Turkey, and Romania (Albu et al. 2013); Zimbabwe (Chamisa 2000); and Ghana (Assenso-Okofo, Ali & Ahmed 2011), have confirmed the presence of this factor behind the adoption of IFRS in these countries. For instance, the World Bank and IMF were using the access to developmental assistance and finance as a major threat for countries to adopt IFRS. As a result of such financial pressures, since 2005, more developing countries chose to adopt IFRS. Yet, limited study has been undertaken in the case of Vietnam and whether the policymakers, auditing and academic communities are influenced in a similar ways or not is still to be ascertained (Phan, Mascitelli & Barut 2014a).

IFRS are not required or allowed in Vietnam as the financial reporting rules. All Vietnamese businesses are required to report under VAS. There are significant differences between the current VAS and IFRS. This is because VAS is generally based on the international accounting standards (IAS) issued prior to 2003 with adjustments for Vietnamese economic, finance and accounting conditions. According to Pham (2012), the overall de jure convergence (convergence by accounting regulation) of VAS and IFRS is about 66 per cent in which the measurement convergence is at a higher rate (75.8 per cent) and the disclosure convergence is at lower rate (61.9 per cent). The findings of Phan, Mascitelli and Barut (2013) revealed that disclosure convergence between VAS and IFRS is significantly lower because most of the IASB standards require additional disclosure relative to its equivalent VAS. This disparity leads to the concern that financial statements prepared under VAS may not fully need the external users’ needs for accounting information. Thus, it is not uncommon practice in Vietnam that companies prepare two separate financial statements, one under mandatory VAS and the other voluntarily compliant with IFRS for overseas financing purposes.

The timing of this research in Vietnam is appropriate because the Vietnamese accounting system is in a phase of transition towards IFRS (Phan & Mascitelli 2014). The Ministry of Finance, recently, made a decision to mandate full IFRS adoption for public enterprises (banking, insurance and publicly listed companies) by 2020 and allow these public enterprises to early adopt IFRS in 2017 (Vo 2014). Recent economic history of Vietnam has been full of economic stop and starts, particularly, its jump from a centrally planned economy to a more market-friendly one. This kind of externalization has created a significant number of changes in the accounting practices of the country (Bui 2011). This metamorphosis is still in progress as to how this eventual alignment with IFRS would occur. There is no clear-cut feedback about how the key stakeholders are thinking about these changes and what are the key impacting factors working behind their choices (Phan 2014). So, there is a much needed perception-based study to understand the attitudes of all the members associated with the accounting profession in Vietnam. The current study goes precisely in this direction so as to ascertain the responses of all the stakeholders.