IFRS ADOPTION IN VIETNAM

Executive Summary
The report is divided into three major sections apart from the introduction and conclusion. The first part explains the advantages of IFRS and relates the same to Vietnam. The second section takes record of all the drawbacks that are likely to face Vietnam should the country adopt IFRS. The next section harmonizes the two previous sections and recommends that Vietnam adopt IFRS. The other last sections of the report have the appendix and the bibliography.

Introduction
International Financial Reporting Standards abbreviated as IFRS form one of the most used accounting standards internationally (Phan et al, 2014). The standards are issued by International Accounting Standards Board (ISAB) that is an independent organization (Phan et al, 2014). According to Phan et al (2014) Vietnam compared to other developing countries lost decades of development, being left behind by its neighbors. Nguyen et al (2012) note that Vietnam is becoming active and successful in its participation in the international economy (World Bank, 2010). The country has an annual GDP growth of 7.2% making substantial progress in adopting market oriented reforms (Phan et al, 2013)
Primary Benefits of Vietnam Adopting IFRS
Available literature does not reflect Vietnam adopting IFRS instead the country is still aligned with the Vietnam Accounting Standards (VAS). The two are different a great deal. IFRS will confer a plethora of advantages to Vietnam. The benefits will be imminent in the accounting profession as well as the academic fraternity (Ahmed et al, 2013).  First off, the country will be able to increase quality in financial reporting (Nguyen et al, 2012; Ahmed et al, 2013). Phan et al (2014) argue that studies in over 21 countries that have adopted IFRS voluntarily had fewer earnings, effective and timely loss recognition, and had more value relevance in reference to accounting than others (Ahmed et al, 2013).  There is also high quality of measurements in IFRS including fair value, thus better reflections of the economic positions of entities in the market (Ahmed et al, 2013).
Secondly, IFRS reporting increases the ability to compare firms in different countries across different markets and the world in general. This increases comparability and compatibility of firms in any given country that adopts IFRS. With this in place cross-border investments are facilitated. Vietnam could benefit more from investments from other countries once it adopts IFRS thus increasing its development capabilities a notch higher (Nguyen et al, 2012). IFRS also increases the access to the international capital markets easily than the domestic based accounting standards. The disclosures under IFRS will enable transparency and increased information asymmetry in different organizations (Nguyen et al, 2012). This is good for Vietnam since it is at high level of internationalization and thus with IFRS Vietnam could raise funds in overseas markets.
Thirdly, the adopting firms will be able to benefit from the period they begin to implement additional disclosure policies under IFRS (Ahmed et al, 2013). The firms will have access to capital markets, increase its price for products, and attract expert workforce and professionals. This will majorly be based upon the transparency IFRS offers a firm (Nguyen et al, 2012). Vietnam in this case will be able to be competitive in its exports compared to its neighbors.
Primary Drawbacks of Vietnam Adopting IFRS
This drawback will come in the form of disadvantages and challenges facing the adoption of IFRS. Firstly, there are costs that must be incurred during the adoption of IFRS (Nguyen et al, 2012). The cost include: staff training, IFRS project team, system and software installation and maintenance, external data and audit costs, extra tax advice and technical advice costs, costs incurred in third party communications and cost of all the changes (Phan et al, 2013)( see Appendix). Vietnam having the domestic accounting standard that is less transparent and less lucid is likely to incur a lot of costs when adopting IFRS (Phan et al, 2014).
Secondly, there is a challenge of the difference between the VAS and IFRS (Phan et al, 2014). VAS is primarily monitored by the government and all the financial information is submitted to the ministry of finance. This means that the government is the one benefiting from the information (Phan et al, 2014). On the other hand in IFRS the information is intended for the investors thus if the government is not willing to tweak its stand it would be difficult to adopt IFRS.
Thirdly, there may be lack of adequate experts or professionals who are competent enough to handle the new accounting regime effectively (Ball, 2006). However much there are accountants and scholars still undergoing accounting, they are still conformed to VAS and thus there will be need to train them in this new accounting principle (Phan et al, 2014). Additionally, the cost and time of training as aforementioned is also high notwithstanding the time consumption that also comes along (Nguyen et al, 2012).
There is also language barrier since the official language in Vietnam is Vietnamese (Phan et al, 2014). Translating the whole IFRS would be time consuming while at the same time inevitable (Phan et al, 2014). Last but not least the tax regime is also tied to the accounting system thus separating the two during the adoption of IFRS would be too cumbersome (Nguyen et al, 2012).
Advice to Vietnam Government
Based on the advantages that IFRS are likely to confer to Vietnam, it would be prudent if the country adopts it. The current VAS is government controlled thus closing the economy for potential investors in the country. Through the transparency in disclosure under the IFRS regime the economy of the country shall be transformed. The country will attract foreign direct investments, increase its accounting quality especially in all the firms that are in the country, the academic and professional bodies will also benefit since they will study something that will make them diversified. The costs of adoption are high yes, but compared to the benefits it is the only best way for Vietnam.
Conclusion
IFRS is a very new term that is gaining edge in the academic and professional arena. There are advantages and disadvantages of IFRS. As seen, Vietnam is one of those countries that are still confined to its VAS other than IFRS. There are benefits the country could have once adopting IFRS. Despite the drawbacks IFRS, the benefits accrued in the long run will be amazing and worth the risk of adopting IFRS. The economy will be better placed in the world map than it is now.

Bibliography
Ahmed, A.S., Neel, M. and Wang, D. 2013. Does Mandatory Adoption of IFRS Improve Accounting Quality? Preliminary Evidence. Contemporary Accounting Research, 30 (4), 1344- 1372.
Ball, R. 2006. International Financial Reporting Standards (IFRS): Pros and Cons for Investors. Accounting and Business Research, Forthcoming, 25-33.
Nguyen, C.P. and Tran, D.K.N. 2012. International harmonization and national particularities of accounting: Recent accounting development in Vietnam. Journal of Accounting and Organizational Change, 8 (3), 431-451.
Phan, D., Mascitelli, B. & Barut, M. 2013. Perceptions of Accounting Professionals towards International Financial Reporting Standards (IFRS) in Developing Country: Evidence from Vietnam. Global Review Accounting and Finance, 5(1), 132-152.
Phan, D., Mascitelli, B. & Barut, M. 2013. Perceptions of Accounting Professionals towards International Financial Reporting Standards (IFRS) in Developing Country: Evidence from Vietnam. Rydges Melbourne: The 3rd Global Accounting, Finance and Economics Conference.



Appendix

(Phan et al, 2013)