IFRS, ESG, and integration with global capital markets

Foreign investors putting up huge stakes in Vietnam seek strategically harmonised financial reporting.

- By Harini Sridharan Chief nodal officer in Vietnam Indian Institute of Chartered Accountants

When any two cultures come together, while celebrating the diversity between them, a common thread that keeps the relationship alive is always sought out.Applying the same parallel to the increasing cross-border investment in Vietnam by foreigners, they would always want to know the revenue, expenses, and profit in terms they understand. So, will applying financial reporting methods convenient to each investor be a solution?

It would be flawed for two reasons: multiple investors following multiple financial reporting methods would make the financial statements within the country incomparable; and different reporting frameworks followed by different entities would make it extremely difficult for tax and licensing authorities to oversee operations.

So, that is where International Financial Reporting Standards (IFRS), a standardised principle-based framework for preparing the financial statements, enables reduction in information asymmetry, accountability, and comparability across international jurisdictions.

Understanding this, the Vietnamese Ministry of Finance in January made IFRS adoption mandatory for consolidated financial statements of state-owned enterprises, listed companies, and large-scale public companies in Vietnam.