INTERNATIONAL FINANCIAL REPORTING (IFRS)

SERVICES ON PREPARATION OF FINANCIAL REPORTS ACCORDING TO STANDARDS

INTERNATIONAL FINANCIAL REPORTS (IFRS)

1. DESCRIPTION OF THE SERVICE

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.

2. SERVICE USERS

According to Decision No. 345/QD-BTC, dated March 16, 2020 of the Ministry of Finance, there has been a plan, implementation and mandatory application of IFRS to the following subjects:

For consolidated financial statements:

- Parent company of a State economic group;

- The parent company is a listed company;

- A large-scale public company is an unlisted parent company;

- Other parent companies.

For separate financial statements:

Enterprises with 100% foreign direct investment are subsidiaries of foreign parent companies with needs and sufficient resources.

 3. WORK CONTENT

ROADMAP FOR APPLYING INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

a. Phase 1, voluntary application (2022 to 2025):

The following enterprises have the need and sufficient resources to notify the Ministry of Finance before voluntarily applying IFRS to prepare consolidated financial statements and separate financial statements.

b. Phase 2, mandatory application (after 2025)

Based on the assessment of the implementation of IFRS application in phase 1, the Ministry of Finance, based on the needs and readiness of businesses and the actual situation, stipulates the plan and time for mandatory application. IFRS to prepare consolidated financial statements and separate financial statements.

REQUIREMENTS AND HOW TO APPLY IFRS:

- When applying IFRS, businesses must ensure to provide full information and explain clearly and transparently to tax authorities, management and supervisory agencies and be responsible before the law for determining obligations to the Bank. State books.

- Enterprises must present and explain in detail in their financial statements the differences between accounting profit and taxable income (if any). Enterprises shall declare and pay taxes according to the provisions of tax law.

- Enterprises subject to IFRS application must apply all effective IFRS according to the regulations of the International Financial Reporting Standards Board (IASB) at the same time. When the IASB makes amendments, supplements or replacements to IFRS, it is necessary to promptly publish the translation to unify implementation for units subject to application.

- Enterprises voluntarily or compulsorily apply IFRS according to the principle of consistency throughout the entire financial year.

- The Ministry of Finance promulgates criteria and guidelines to evaluate financial information of enterprises, ensuring comparability between enterprises applying IFRS and enterprises not applying IFRS.

- The Ministry of Finance publishes a list of businesses that voluntarily or are required to apply IFRS to prepare consolidated financial statements or separate financial statements on the Ministry of Finance's electronic information portal.

4. STEPS TO IMPLEMENT SERVICES

The process of implementing the service of preparing financial statements according to international financial reporting standards (IFRS) managed by CPA HCM will be carried out as follows:

Step 1: Contact customers who need financial reporting services according to international financial reporting standards (IFRS) to advise, answer questions and collect some basic information to complete the survey. customer information and appropriate service fee quotes.

Step 2: After agreeing to sign the contract, the Operations Department staff will discuss the Working Plan to perform the service and request documents to be provided to prepare a report.

Step 3: Carry out professional activities such as interviews, checking records, documents and related activities to prepare conversion reports.

Step 4: Discuss with customers about report implementation results, advise, and answer questions from customers.

Step 5: Hand over reports, complete services and pay debts.

5. 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 issued 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 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.