International Financial Reporting Standards abbreviated as IFRS is an important change in the preparation and presentation of current financial reports. The use of IFRS financial reporting standards helps reduce international financial transactions. Reduce costs and increase transparency.

So what are IFRS accounting standards? Learn about the benefits of applying IFRS with CPA HCM through the article below.

WHAT IS IFRS?

IFRS is an international financial reporting standard. The content is designed and developed by an independent, non-profit organization, the International Accounting Standards Board (IASB). The introduction of IFRS provides an international framework for preparing and presenting financial statements for public companies. It can be said that this is the most general guide and explanation on how to prepare financial statements. Rather than establishing industry-specific reporting rules. To date, IFRS has become the most popular common accounting language globally.

According to recommendations of the World Bank. Countries should prioritize adopting IFRS. Rather than building accounting practices according to each country's conditions. Because these standards are widely accepted internationally. And is flexibly applied in consolidating best practices in the world. Over the years, the World Bank has accepted IFRS. And based on the content as a basis for the presentation of financial statements submitted by customers using loans and credits of this Bank.

BENEFITS OF APPLYING IFRS IN VIETNAM

IFRS is now gradually popular with many benefits. Brought to Accounting and Finance workers in particular as well as businesses in general. Includes the following outstanding features:

In the context of accounting is considered a global business language. Allowing the application of IFRS will help state management agencies as well as owners and investors. Especially foreign investors. There are tools to evaluate and compare financial information between units according to the same language and common standards. From there, appropriate economic decisions can be made.

Easily create a legal framework according to international standards

Applying IFRS will create conditions for businesses to be eligible to list on international markets. Or receive preferential loans from international financial institutions (World Bank, International Monetary Fund, ...). Understanding what IFRS is will help apply IFRS. From there, a legal framework will be created for accounting for many types of financial instruments, assets and liabilities at fair value.

The development of specific regulations on financial instruments and derivative transactions has a strong impact on both primary and secondary markets.

- For the primary market: Banks and financial institutions have a clear legal basis to account for newly issued financial instruments such as futures contracts, forward contracts, and options contracts. and swap contracts.

- For the secondary market: a fully promulgated system of financial reporting standards on financial instruments will contribute to promoting investment activities in derivative financial instruments as a type of securities on the centralized exchange. . In particular, the application of IFRS is one of the factors to upgrade the ranking of the Vietnamese stock market.

Improve the transparency and honesty of financial statements.

Understanding what IFRS is and applying IFRS will improve the transparency and honesty of financial statements. Thereby, helping to protect the interests of investors. Explanation for this. Because IFRS requires financial statement items to be recorded and presented according to substance rather than form. From here, the impact of the transaction form on the accounting method is minimized. Support to increase comparability between financial statements of enterprises in Vietnam with other enterprises in the region and the world.

IFRS requires detailed presentation and explanation of the risks that businesses may encounter such as: business risks, credit risks, policy risks... in order to provide more complete information to investors. , creditors when deciding to invest in enterprises. IFRS also requires the application of many financial models to determine the value of assets and liabilities according to fair value, recoverable value, value in use, time value, intrinsic value…

Therefore, financial information provided on the IFRS platform will help Vietnamese businesses evaluate their financial situation at the time of reporting. At the same time, it also helps the board of directors get information to better forecast future operating results and cash flows. From there, there is a basis and tools to carry out management and administration work in accordance with the practical situation.

When applying IFRS, businesses will generally incur some initial investment costs for retraining human resources. At the same time, information systems and accounting software are also changed. Although, the initial investment costs are relatively large. But in the long term, the benefits from information transparency and attracting investors will not only bring more benefits than the initial costs but also help businesses develop stably and sustainably.