SUBJECT PRINCIPLES OF ACCOUNTING ASSESSMENT difference between VAS and IAS IFRS

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY SCHOOL OF ECONOMICS SUBJECT: PRINCIPLES OF ACCOUNTING ASSESSMENT INSTRUCTOR: NGUYỄN THỊ THU CONDUCTED IN 2021 GROUP REPORT Student’s name Advantages Disadvantages % Contribution Lê Đặng Hà An Lecture lessons are easy to understand None 20% Lê Hồng Minh Duy None 20% Lê Quang Minh Theoretical lessons None Nhật are combined with many practical situations, the detailed information given by the lecturer was capable of being acknowledged by students 15% Huỳnh Nhật Bảo Ngọc Many practical examples and cases help students understand more easily It is difficult to analyse business transaction and prepare financial statement 20% Lâm Nhựt Phi All lessons are easy to understand, practical examples It takes time to prepare a journal, financial statement, by writing on paper and hard to adjust comprehensively Less accuracy by writing on paper instead of using a computer 15% Phan Thị Tú Quyên Lecturer pays None attention to students, Lectures are quality All lessons are easy to understand 10% Table of Contents Part I: Introduction………………………………………………….………….4 Part II: Content……………………………………………………………… Difference between VAS and IAS/IFAS…………………….……… ……….5 a Form…………………………………………………………….…… b Chart of account………….………………………….…………………6 c Financial statement system…………………………………………….9 d Ledger……………………………………………………………… 10 IFRS & VAS balance sheet compared……… 10 a Money (Cash)………………………….……….……………….……10 b Trade receivables……………………………………….…………….11 c Inventories………………………………………………… … …….11 Part III: Conclusion…………………………………………………… …….14 References…………………………………………………………………… 15 PART I: INTRODUCTION IAS (International Accounting Standard) and IFRS (International Financial Reporting Standard) are both composed by ISRB (International Standard Reporting Board) Before 2003, all international accounting standards were announced under the name IAS After 2003, new Accounting Standards were renamed to IFRS Nowadays, International Accounting Standards include a total of 41 IAS and 16 IFRS IASB (International Accounting Standards Board) gathers experts who are in different majors, from many nations and have the ability to read and understand Financial Reports by different aspects such as financial reporters, managers, financial report users as well as scholars Composing and announcing procedures of IAS / IFRS are well-organized to assure their quality and practicality Nations worldwide who use IAS/IFRS as their national accounting standards are European countries, Singapore, Australia, and so on Besides, Vietnam is having their standards which is called VAS adjusted to reduce their differences with IFRS PART II: CONTENT Difference between VAS and IAS / IFRS a Form IAS doesn't recommend form (such as report forms, unified accounting system, accounting book format, uniform original documents form) Unlike VAS, IAS, although detailed definitions, methods, presentation and information required to be presented in the financial statements, IAS, like most countries, does not require all Enterprises must use the same financial reporting forms because companies have very different sizes and characteristics of business, so the account system, the documents systems, the books Most and especially the unified financial reporting forms will not meet the diverse needs of businesses and investors Vietnamese accounting system offers a unified system of accounts, mandatory financial reporting forms for all applicable businesses (most countries in the world not) A few countries like France have a unified system of accounts, but it is more instructive, less compulsory According to the Vietnamese accounting regime, companies opening more level accounting systems outside the unified accounting system require permission from the Ministry of Finance Some industry professional associations may have a unified system of accounts, but it is purely instructive and not mandatory The Hotels Association of America and Canada, for example, offers a "unified accounting system for US and Canadian hotels" as an optional guide Actually, it is a set of financial statements, governance reports and the interpretation of the indicators of those reports In summary, for matters of appearance of the outside world, the Vietnamese accounting regime is highly compulsory The IAS has a conceptual framework and a high coherence of standards VAS still has many unclear issues, lacks many problems and especially contradictions between standards For example, in VAS 01, the general standard gives the accounting requirement as full, timely; comparing but in other standards the provision for impairment of inventories, impairment of securities, or adjustments of profit and loss for investors in associates, joint ventures and other events occurring after the balance sheet date re-adjusted at the end of the year That is, corporate annual reports not have to address the above issues So if these events arise during the interim reporting periods, but are not recorded in this report, wait until the end of the year Likewise, according to VAS, consolidated financial statements are only required at the end of the year In mid-year reports, consolidation is not required, but only the parent company's separate statements are published In 2008, a real situation arose that the parent company VINASHINETRO had very good business results, but its 100% owned subsidiary Dai Nam had very bad business results and financial position According to VAS, this group only published mid-year financial statements of the parent company with very good business results, the share price of this group increased dramatically At the end of the year, when it was forced to publish the consolidated financial statements with very poor business results, the share price of the group fell sharply b Chart of account Is a unified accounting system necessary? According to IAS or IFRS, IAS or IFRS only regulates financial statements, not accounting systems because it is the accounting means to meet the output of financial statements According to international accounting practice, enterprises design their own accounting account system from information requirements and require financial statements and management reports (not only the requirements of financial statements The designer analyzes and comes up with a suitable account system that can handle financial and management reporting Note that fulfilling the requirements of the governance reports requires more accounts than is required by statutory financial statements In most countries, there is no concept of a unified accounting system for a country because each company has different information and governance needs, so it is the most appropriate for companies to build themselves Accounting academics draw on experience, management theory and accounting to provide instructional account systems for companies and to teach in accounting schools According to Vietnam's accounting system, the Ministry of Finance issues a unified system of accounting for businesses However, it must be understood that this account system only meets the preparation of ordinary financial statements for investors, but does not meet the requirements of governance There are many people who think that a single accounting system in one country is a great benefit because the common unity makes accounting, teaching and learning as well as using accounting in companies easier However, many people believe that teaching and learning a unified accounting system with prenumbered accounts can make learners lack passivity and machines not follow the nature of transactions Accounts title Base on international practice, account title is the abbreviation for the account balance or management requirement For instance, in order to monitor fixed assets we need information on historical cost of fixed assets as well as accumulated depreciation of fixed assets In Vietnam's system of accounts, now it is refered to as fixed asset depreciation Its full name is derived from the international practice of "accumulated depreciation." Do not incorporate several parameters into the same account Many accounts in accounting are not synonymous with complex journals, and few accounts are not plain Internationally different goals must be recorded and reported separately, should not be divided into multiple sections with very different content and meanings in one account For instance, as claimed by VAS, the main cost account includes many items of different nature, with different management such as loan expense, securities investment loss, foreign currency difference loss, provision stock price discounts According to international information, these goals must be reproduced and reported separately for administrative purposes, so these sections are segregated into separate accounts International financial cost includes only the cost of borrowing and the costs associated with borrowing money Securities loss, exchange rate difference loss, unrealized loss on investment (causing the market to decline, but not selling stocks, so this loss is not realized) these accounts are split into Special accounts not in the main account Account recording techniques According to international practice, accounts are designed so that the closing balances accurately reflect the amount that is required to be reported According to the Vietnamese accounting system, the part of the accounting system is unified Balance of discount and discount accounts, at the end of the period, is directly transferred to the Debit of Revenue account to record revenue decrease So the revenue account balance is the amount of net sales, not gross revenue Income statements need to show gross revenue and sales deductions, then the accountant needs some technique to take balances of these accounts before it can be transferred to the business account Are there many Debits for many Credits in the same accounting statement? According to international practice, it is allowed to allow more than one Debit to many Credits in the same term, however, it is not advisable to abuse the recording of multiple Debits with many Credits counterparts to lose the clarity of the accountant The concept of recording an account with a ledger, having a reciprocal account for each economic operation (as is the practice of Vietnam) is unnecessary and impossible The famous accounting software and international practice are written according to the principle that allows many Debits to correspond with many Credits Allowing the recording of multiple counter liabilities with multiple Credits make it simple to book and in some situations it reflects the nature of the transaction rather than splitting it into many accounts Just to solve the concept of not recording many Debits with many Credits For example, for a month-end payroll, the company usually controls labor costs by: (1) Nature of items of labor cost such as: (a) Salary for employees, (b) Overtime salary, (c) Social insurance expenses, (d) Health insurance (2) By department or division, for example: (a) Direct employees (b) Sales division (c) Company management (d) Production management (3) Under the liabilities, the company will manage under (a) Salaries payable, (b) Personal income tax payable, (c) Social insurance payable, (d) Health insurance payable, (e) Payable unemployment insurance Vietnamese accounting practices: According to official accounting principles documents of Vietnam from ancient years (By the Finance and Accounting University under the Ministry of Finance and other universities and teaches accounting Publication) has given the principle of recording an account is not recording multiple Debits with respect to many Credits in an accounting system So far we have not found a legal document prohibiting the recording of multiple Debits against multiple Credits On the other hand, in the current accounting regime documents issued by the Ministry of Finance, there are many terms with many Debits, for many Credits in the same term It is understood that the current accounting regime of Vietnam allows many credit entries to be recorded with many Credits in one item However, due to the habit of previous accounting recording principles, in fact, many companies also have the principle of not recording a lot of counter-debt with many Credits in the same term, but only recording a counter-debt for multiple Credits or in contrast a Credit is for many liabilities Most of Vietnam's accounting software in Vietnam are also written according to that principle However, it should be said that many foreign companies in Vietnam still have a lot of counter-debt with many Credits in the same term as international practice That does not reduce the transparency of the accountant because it has an accompanying original document to prove it c Financial statement system IAS VAS The enterprise's financial statement system includes: The enterprise's financial statement system includes: (a) Balance sheet at the end of the period; (a) Balance sheet of accounting; (b) The report on business results in the period, which can present the business results in two types of reports: business result report and income summary report; (c) Report on change of equity; (d) Cash flow statement; and (b) Report on business results; (c) Cash flow statement; (d) Notes to financial statements The report on change of equity is presented in the notes to the financial statements (e) Notes to the financial statements, including those of major accounting policies and other notes (f) The balance sheet at the beginning of the most recent period of comparison when the enterprise applies retrospectively an accounting policy or makes a retroactive adjustment to a number of items in the financial statements or when the Enterprises reclassify the items on the financial statements Enterprises can give different names to reports instead of using names in standards d Ledger IAS / IFRS usually uses one type of ledger, which is general ledger On the other hand, VAS uses two types of ledger, which are general ledger and subsidiary ledger A subsidiary ledger contains detailed information on specific accounts in the general ledger Information systems often include several subsidiary ledgers Two of the most important are accounts receivable ledger, which stores transaction data of individual customers and accounts payable ledger, which stores transaction data of individual suppliers, Individual accounts in subsidiary ledgers are often arranged alphabetically Accounts receivable subsidiary ledger are used for preparing bills sent to customers (one account for each customer), while general ledger is used for preparing financial statements and controlling account balance equals sum of subsidiary account balances There are at least four benefits to obtain from subsidiary ledger First of all, it removes excessive details, and details accounts, from general ledger Furthermore, it updates information readily available on specific customers and suppliers Subsidiary ledgers also aid in error identification for specific accounts and has potential efficiencies in record-keeping through division of labor in posting IAS / IFRS & VAS balance sheet compared A balance sheet (BSC) is an important financial statement that reflects the financial position of a business at a particular time Let us compare some of the major items that affect the financial statements under IAS / IFRS and VAS The left side presents items according to IAS and international accounting practice, the right side shows VAS and Vietnamese accounting practice a Money (Cash) 10 IAS VAS Immediately acknowledging the payment and collection, upon approval of the check Business does not depend on banks At the end of the period, the accountant must set up a balance sheet and compare the balance of money according to the company's accounting books against the balance of the bank Credit is based on Debit and Credit Notes from banks Businesses are completely dependent on the records of the bank Thus, when banks have recorded errors and mistakes, enterprises must still follow b Trade receivables IAS VAS Separate industry and exchange receivables (from purchases, products, or services) from receivables from the disposition of fixed assets or other receivables, such as stock sales Because cash flows from operations, such as purchasing and selling goods, must be distinguished from cash flows from investment activities, such as purchasing and selling fixed assets and financial assets There is no distinction between market receivables (from purchases of goods) and capital asset sales receivables This causes the financial report reader to obtain incorrect facts, which has an effect on the preparation of cash balance statements, and the cash flow from running expenses can be confused with the cash flow from acquisition c Inventories IAS VAS IAS 02: LIFO method is not allowed, the goal is to minimize the option of enterprises so investors will easily compare financial statements because there are less choice between FIFO methods , on average, and so on VAS 02: LIFO is not allowed, US GAAP also accepts LIFO due to the history of many enterprises in US using LIFO Financial statements which use different methods can yield dissimilar results 11 IAS usually uses the normal costing method: direct raw materials and direct labor are computed base on the reality (not exceeding allowable limits), but the overall production cost is amortized as stated based on the level of operation (This is from the most recent budget's level of activity.) Product values would be consistent over time (an critical factor in determining sale prices), although production volumes may vary widely between periods VAS requires costing by conventional method However, because of the inadequate and clear instructions as well as the best practices from past to present and the education in universities, most businesses still charge the actual cost Actual number of direct raw materials, direct labor and overheads The product's production costs are not measured in accordance with the corporation's usual operational standard as prescribed by VAS Actual distribution of production overheads can cause product prices to fluctuate between periods (months) (Most businesses are seasonal) and the use of commodity prices for purchasing and governance actions is often restricted Direct labor costs are also variable direct labor costs to make information more meaningful in governance The production can vary direct labour costs According to the international standard, therefore, labour cost expenses typically involve just benefits, direct workers' salaries and numbers of direct hours of service, such as half-shift meals, extra money It does not include payments that follow the employee directly such as social insurance costs, health insurance, union fees, uniforms, labor protection Overtime difference coefficient greater than is calculated as indirect labor cost The wage and other expenses borne by the worker directly involved in manufacturing are included in the direct labor cost Non-salary contributions involve social security, life insurance, and union dues And in the building industry, figures such as IAS On the balance sheet date, a provision for devaluation of Set up provisions for devaluation of inventories at the end of the year In 12 inventories is made All quarterly records, both temporary and permanent, must be set up Investors require accurate facts about a company's financial status in any interim accounts (month, quarter), rather than waiting until the year-end financial statements the annual periodical financial statements, businesses are not allowed to make allowances for depreciation of inventories The financial status of the company might not be correctly reflected in the statement of financial position 13 PART III: CONCLUSION From our research, we have shown the basic similarities and differences between VAS and IAS / IFRS VAS develops on the IAS / IFRS platform and has many changes to suit Vietnamese businesses Financial statements are systematically synthesizing from accounting books according to certain economic and financial indicators, periodically drafted by accountants Financial statements are presented in the form of general reports under a certain structure in accordance with the accounting principles and regulations to provide useful information about the financial situation of the business to the target audience use accounting information In general, VAS has a high formality imposition for easy management, but IFRS has high consistency thanks to the conceptual framework Accounting standards for foreign firms in Vietnam will face difficulties in transforming the accounting system and reducing group uniformity The increasingly developed international market economy has put on a more complete requirement for the system of accounting standards Vietnam's financial reporting framework must constantly be improved and changed to be flexible and suitable for users in many different countries and contexts Due to many limitations in knowledge and experience, our presentation was inevitable We hope to receive comments and suggestions from the lecturer 14 REFERENCES http://www.vacpa.org.vn/Page/Detail.aspx?newid=4302 http://sosanhvasifrs.blogspot.com/ https://blog.sapp.edu.vn/acca/su-khac-biet-giua-chuan-muc-ke-toan-viet-namva-quoc-te https://dokumen.pub/fundamental-accounting-principles-22nbsped9780077632892-0077632893-9780077862275-0077862279.html 15 ... Australia, and so on Besides, Vietnam is having their standards which is called VAS adjusted to reduce their differences with IFRS PART II: CONTENT Difference between VAS and IAS / IFRS a Form IAS doesn't... international accounting standards were announced under the name IAS After 2003, new Accounting Standards were renamed to IFRS Nowadays, International Accounting Standards include a total of 41 IAS and. .. From our research, we have shown the basic similarities and differences between VAS and IAS / IFRS VAS develops on the IAS / IFRS platform and has many changes to suit Vietnamese businesses Financial