the benefits and challenges of applying of ifrs in accounting system of viet nam and researching about accounting system in some developed countries

With company1.1.1 Costs of Applying IFRS in Companies: Implementation and ongoing compliance Costs: Transitioning to IFRS caninvolve significant initial and ongoing costs related to trai

BANKING ACADEMY OF VIETNAM

ADVANCED PROGRAM FACULTY OF ACCOUNTING AND AUDITING

TOPIC:

THE BENEFITS AND CHALLENGES OF APPLYING OF IFRS IN ACCOUNTING SYSTEM OF VIET NAM and RESEARCHING ABOUT ACCOUNTING SYSTEM IN

SOME DEVELOPED COUNTRIES

Teacher: PhD Nguyen Thi Thanh Mai

Group 9: Nguyen Tien Dung - 23A4040023

Nguyen Phuong Lien - 23A4020200

Tran Vuong Ngoc - 23A4020279

Nguyen Thi Huyen Trang - 23A4020400

Subject: International Accounting

Hanoi, December 3 2023 rd

TABLE OF CONTENTS

INTRODUCTION 3

I COST AND BENEFIT OF APPLYING IFRS: 4

1.1 With company 4

1.1.1 Costs of Applying IFRS in Companies: 4

1.1.2 Benefits of Applying IFRS: 4

1.2 With Stakeholders: 5

1.2.1 Cost of Applying IFRS: 5

1.2.2 Benefits of Applying IFRS: 5

II APPLYING IFRS IN VIETNAM: 7

2.1 What is IFRS? 7

2.2 IFRS applying in Vietnam 7

2.2.1 Benefits of Adopting IFRS in Vietnam: 7

2.2.2 Challenges of Adopting IFRS in Vietnam: 8

III LITERATURE REVIEW: 9

3.1 Overview of Accounting: 9

3.2 The role of Accounting: 9

3.3 Fields of Accounting: 10

3.4 Functions of Accounting: 10

3.5 Some influential factors of country’s accounting system: 11

IV ACCOUNTING IN SOME COUNTRIES: 12

4.1 UK 12

4.2 US 16

4.3 AUSTRALIA 20

4.4 MALAYSIA 24

4.5 SINGAPORE: 28

4.6 JAPAN 30

4.7 CHINA 33

REFERENCES 37

Today, the objective development of international financial markets andcommercial activities beyond national borders requires a common system ofaccounting standards that is widely accepted around the world The InternationalFinancial Reporting Standards (IFRS) are a set of accounting rules for the financialstatements of public companies that are intended to make them consistent, transparent,and easily comparable around the world The IFRS is issued by the InternationalAccounting Standards Board (IASB) IFRS specify in detail how companies mustmaintain their records and report their expenses and income They were established tocreate a common accounting language that could be understood globally by investors,auditors, government regulators, and other interested parties Applying IFRS infinancial statements is becoming more and more popular on a global scale andVietnam can not stand aside Currently, Vietnam is entering the period of worldeconomic integration and the application of IFRS has become urgent In fact, Vietnamhas been taking positive steps to be ready for the widespread application of IFRS.However, implementing IFRS is not a simple and very important issue, so Vietnamalso needs the advice and support of the IASB and experts of internation professionalorganizations and take apporpriate transitional steps to be more complete andcompetitive To learn more about this topic, we decided to research about the

BENEFITS AND CHALLENGES OF APPLYING IFRS IN VIETNAM In addition, we also inquired about the ACCOUNTING SYSTEMS OF DEVELOPED COUNTRIES such as: UK, US, Australia, Malaysia, Singapore, Japan, China to show

the optimization and differences these countries compared to Vietnam Because ourknowledge is still limited, the article certainly has shortcomings We hope to receiveyour sincere comments so we can better understand this issue Thank you!

I COST AND BENEFIT OF APPLYING IFRS:

1.1 With company

1.1.1 Costs of Applying IFRS in Companies:

Implementation and ongoing compliance Costs: Transitioning to IFRS caninvolve significant initial and ongoing costs related to training ( Because IFRSimplementation often necessitates a dedicated team and considerable time andresources to navigate the complexities of the standards), software upgrades, andconsultancy services

Potential Impact on Financial Performance: IFRS adoption may result inchanges to reported financial performance metrics, which could affect investorperceptions and stock prices

1.1.2 Benefits of Applying IFRS:

Increased Comparability and Transparency: IFRS adoption enhances thecomparability of financial statements across companies and borders, enabling investorsand stakeholders to make informed comparisons and investment decisions

Enhanced Global Reach and Access to Capital: IFRS compliance facilitatescross-border listings and attracts international investors, expanding companies' access

to global capital markets

Improved Investor Confidence and Trust: Adherence to internationallyrecognized accounting standards instills greater confidence and trust among investors,promoting long-term financial stability

Reduced Costs of External Reporting: IFRS compliance can streamlinefinancial reporting processes, reducing the costs associated with preparing andauditing financial statements

Improved Internal Control and Risk Management: IFRS implementation oftenstrengthens internal control systems and risk management practices, enhancingoperational efficiency and reducing financial risks

1.2 With Stakeholders:

1.2.1 Cost of Applying IFRS:

Investors:Potential Financial Statement Adjustments: IFRS adoption may lead

to changes in reported financial performance metrics, which could affect investorperceptions and stock prices in the short term

Increased Due Diligence Costs: Investors may need to invest more resources indue diligence and analysis to fully understand the impact of IFRS on companyfinancials

Creditors: Creditors may incur initial costs to evaluate the impact of IFRS on a

company's financial standing and creditworthiness During the transition phase, there's

a potential risk of miscalculating credit risk due to unfamiliarity with IFRS-basedfinancial statements In addition, Creditors may need to increase monitoring costs totrack the ongoing impact of IFRS on a company's financial health

Employees:In some cases, IFRS adoption may lead to restructuring or

cost-cutting measures, potentially resulting in job losses Employees involved in financialreporting or accounting may experience increased workload, stress and need helpadditional training during the IFRS implementation process

Customers: In some cases, companies may pass on the costs of IFRS adoption

to customers in the form of higher prices for goods or services IFRS adoption maylead to confusion and misunderstanding among customers who are not familiar withthe new standards.If customers perceive IFRS adoption as a burden or a source ofhigher costs, it could negatively impact customer relationships

Society as a Whole: The implementation of IFRS may involve significant initial

costs for companies, which could indirectly impact society through reducedinvestment or taxation In the transition phase, there may be temporary economicdisruptions or uncertainties due to the adoption of IFRS

1.2.2 Benefits of Applying IFRS:

Investors: IFRS adoption facilitates a more accurate and consistent comparison

enabling investors to make informed investment decisions, and better assess the

financial health and risks associated with potential investments IFRS complianceopens up a wider range of investment opportunities in multinational companies andemerging markets.

Creditors: IFRS adoption enables creditors to make more informed decisions

about creditworthiness and lending terms, promoting a more efficient and stable creditmarket

IFRS compliance instills greater confidence in creditors regarding thecompany's ability to repay loans and financial obligations

Employees: IFRS adoption enhances financial transparency, allowing

employees to better understand the company's financial health and performance.Specifically, a company can enhance its reputation and attractiveness as an employer,potentially attracting and retaining top talent

Customers: IFRS compliance, customers can assess to better the company's

financial stability and long-term viability, contribute to more informed purchasingdecisions by customers, as they can better understand the company's financial positionand ability to deliver goods or services and promote trust in business relationshipsbetween companies and their customers

Regulators: IFRS adoption promotes efficiency and consistency in financial

reporting, reducing the regulatory burden and associated costs, improvingEnforcement of Accounting Standards and contributing to investor protection andmarket stability by enhancing financial transparency and comparability

Society as a Whole: IFRS helps promote the efficient allocation of capital

across companies and industries, and enhances Corporate Governance (complianceoften strengthens corporate governance practices, leading to more ethical andtransparent business operations) In addition, it fosters financial literacy amongstakeholders, promoting a better understanding of financial information and informedinvestment decisions

II APPLYING IFRS IN VIETNAM:

2.1 What is IFRS?

IFRS (International Financial Reporting Standards) is an international financialreporting standard IFRS are accounting standards issued by the InternationalAccounting Standards Board (IASB) to ensure corporate financial reporting istransparent, consistent and comparable globally IFRS is very important for companieswith businesses in many different countries

IFRS provides a set of general principles and rules for the recognition,measurement and presentation of financial information These standards help ensurethat the financial statements of businesses around the world are prepared according toconsistent principles, making comparison and analysis easier

2.2 IFRS applying in Vietnam

Along with the globalization trend of economic cooperation and development,accounting is no longer an intrinsic, unique issue for each country Therefore, to suitthe diverse requirements of businesses as well as investors, countries often allowbusinesses to choose national financial reporting standards or international financialreporting standards (IFRS) when preparing and presenting financial statements.According to documents from the International Financial Reporting Standards Board(IASB), up to now, 131/143 countries and territories (accounting for 93% of thecountries surveyed by the IASB) have declared Allows application of IFRS in differentforms

Applying International Financial Reporting Standards (IFRS) in Vietnam canbring several advantages and disadvantages:

2.2.1 Benefits of Adopting IFRS in Vietnam:

Global Compatibility: IFRS is widely accepted and used globally Aligningwith IFRS enhances Vietnam's financial reporting standards, making it easier forinternational investors, businesses, and stakeholders to understand and comparefinancial statements

Access to Global Markets: Adhering to IFRS can improve Vietnam's credibilityand attractiveness to foreign investors and global capital markets Companiesfollowing IFRS may find it easier to access international funding sources and attractforeign investments.

Improved Transparency and Comparability: IFRS emphasizes transparency andconsistency in financial reporting Its adoption can enhance the transparency,accuracy, and reliability of financial statements, improving comparability amongcompanies within Vietnam and globally

Enhanced Business Efficiency: IFRS adoption might streamline financialreporting processes, reducing the complexity and costs associated with preparingmultiple sets of financial statements for different reporting purposes

Compliance with Global Standards: Aligning with IFRS demonstratesVietnam's commitment to global accounting standards, fostering trust and credibility

in its financial reporting practices

2.2.2 Challenges of Adopting IFRS in Vietnam:

Transition Costs: Transitioning from existing accounting standards to IFRSinvolves costs related to training, system changes, and adapting to new reportingrequirements This can be burdensome for smaller companies or entities with limitedresources

Complexity of Standards: IFRS can be complex and detailed, requiringsignificant expertise and resources to interpret and apply correctly This complexitymight pose challenges for companies, especially those less familiar with internationalaccounting practices

Differences in Interpretation: IFRS principles may be open to interpretation,leading to variations in how different entities apply the standards Ensuringconsistency and comparability might be challenging due to different interpretations.Impact on Small and Medium Enterprises (SMEs): SMEs might face difficulties

in adopting IFRS due to their scale, resources, and capacity to comply with thedetailed reporting requirements

Potential Initial Disruption: The transition period to IFRS might causetemporary disruptions in financial reporting processes, potentially affectingstakeholders' understanding and analysis of financial information.

The decision to adopt IFRS in Vietnam involves weighing these pros and conswhile considering the country's economic structure, business environment, andreadiness of entities to transition to global accounting standards It's crucial to plan andexecute the adoption process systematically, considering the potential impacts onvarious stakeholders and ensuring a smooth transition to achieve the intended benefits

Accounting standards improve the reliability of financial statements The financialstatements include the income statement, the balance sheet, the cash flow statement,and the statement of retained earnings The standardized reporting allows allstakeholders and shareholders to assess the performance of a business Financialstatements need to be transparent, reliable, and accurate

3.2 The role of Accounting:

Accounting is often called “the language of business”, because it communicates

so much of the information that owners, managers, and investors need to evaluate acompany’s financial performance In fact, the purpose of accounting is to helpstakeholders make better business decisions by providing them with financialinformation More importantly, accountants make sure that stakeholders understandthe meaning of financial information, and they work with both individuals andorganizations to help them use financial information to deal with business problems

3.3 Fields of Accounting:

Management Accounting: plays a key role in helping managers carry out theirresponsibilities Because the information that it provides is intended for use by peoplewho perform a wide variety of jobs, the format for reporting information is flexible.Reports are tailored to the needs of individual managers, and the purpose of suchreports is to supply relevant, accurate, timely information in a format that will aidmanagers in making decisions In preparing, analyzing, and communicating suchinformation, accountants work with individuals from all the functional areas of theorganization - human resources, operations, marketing, and finance

Financial Accounting: is responsible for preparing the organization’s financialstatements including the income statement, the statement of owner’s equity, thebalance sheet, and the statement of cash flows that summarize a company’s pastperformance and evaluate its current financial condition While companiesheadquartered in the United States follow Generally Accepted Accounting Principles(GAAP), many countries located outside the US follow a different set of accountingprinciples called International Financial Reporting Standards (IFRS) Thesemultinational standards, which are issued by the International Accounting StandardsBoard (IASB), differ from GAAP in a number of important ways For instance, IFRS

is a little stricter about the ways you can calculate the costs of inventory

3.4 Functions of Accounting:

All companies use accounting to report, track, execute and predict financialtransactions The main functions of accounting are to store and analyze financialinformation and oversee monetary transactions Accounting is used to preparefinancial statements for a company's employees, leaders, and investors Accountingalso functions to ensure the payment of funds into and out of a company

Accounting creates a fiscal history for any company It is used to track expendituresfrom business operations as well as a company's profits It can also be utilized topredict financial success and the future needs of a company to create budgets and takeadvantage of new growth opportunities Accountants use this information to preparefinancial statements used by business professionals and government officials

3.5 Some influential factors of country’s accounting system:

The accounting system of each country is affected by different influentialfactors As there is a very small possibility that influential factors of two countries will

be equal, they can also be considered as generators of national specificities The level

of differences of each influential factor between countries implicates the intensity ofaccounting differences at the international level The actuality of internationalaccounting harmonization issues imposes the need of consideration and detailedexamination of factors that influence the development and accounting system in onecountry

Accounting is affected by the environment in which it operates, but at the sametime, it is one of the factors impacting on this same environment A country’saccounting system is affected by a variety of historical, economic, socio-cultural,institutional, and other non-accounting factors, so it is highly unlikely for theinfluential factors of any two countries to be exactly the same Therefore, it can belogically assumed that the factors affecting the development of a country’s accountingsystem are also the generators of special national traits and, thus, the generators ofdifferences between accounting systems at the international level After all, just ascountries have different histories and political and legal order or even value systems,

so will their accounting systems have more or less differing

development and operating model

To sum up, some factors that affect a country’s accounting system might be:legal system, political system, nature of ownership, differences in the size andcomplexity of business entities, social climate, level of sophistication of administrationand the financial community, level of legislation interference in the operations ofentities, existence of specific accounting legislation, speed of business innovations,level of economic development, growth patterns of an economy, status of professionaleducation and profession associations