Today, IFRS – International Financial Reporting Standards – is no longer optional. It has become a mandatory requirement and the standard framework for many foreign direct investment (FDI) enterprises. While IFRS offers numerous opportunities, it also presents significant challenges. In this article, KMC will provide an in-depth explanation.
IAS and IFRS: The Foundation of Global Accounting Standards
The global accounting standard framework consists of two key systems: IAS and IFRS.
Developed in the 1970s, IAS (International Accounting Standards) is a set of principles designed to ensure transparency, consistency, and comparability in corporate financial statements (FS) worldwide. These standards guide the recognition and presentation of financial transactions. While several IAS standards remain in force, most have been superseded by IFRS.
Today, the International Accounting Standards Board (IASB) has introduced a more modern framework – IFRS (International Financial Reporting Standards) – to establish a unified global accounting language. With 18 active standards, IFRS enhances financial transparency, comparability, and accurate representation of an entity’s financial position. IFRS is currently adopted by over 140 countries, including Vietnam, making it a crucial tool for FDI enterprises to ensure global compliance and meet international investors’ expectations.
Note: IAS and IFRS are not static frameworks; they are continually updated to reflect the evolving global economic landscape.
2025 Turning Point: Key Changes for FDI Enterprises
According to an article in Financial Magazine (published on May 12, 2025), starting in 2025, Vietnam will require large enterprises, including FDI companies, to adopt IFRS for the preparation of consolidated financial statements. This initiative aims to enhance transparency, support global integration, and attract foreign investment. For FDI companies—particularly those from Japan, already familiar with international standards—this presents a valuable opportunity to deepen their global market integration.
As a globally recognized set of standards used in over 140 countries, IFRS allows FDI enterprises to benchmark their performance against parent companies abroad. For instance, IFRS standards related to revenue recognition and asset valuation reflect market realities more accurately than Vietnamese Accounting Standards (VAS). This enables easier consolidation of financial reports between parent and subsidiary entities. Moreover, compliance with international standards helps mitigate the risks of financial misstatements in cross-border transactions.
However, this transition entails challenges, particularly in terms of technology and human resource requirements. FDI enterprises must invest in IFRS-compliant accounting software and upskill their teams to handle IFRS’s complex requirements.
IFRS Transition Solution for FDI Enterprises
Although IFRS offers significant advantages for FDI enterprises, the conversion process can be complex. The standards differ from other frameworks, demand high professional competence, and entail stringent compliance.
Don’t worry. With over 15 years of experience and a team of certified professionals in accounting, taxation, and law, recognized by the Ministry of Finance and the General Department of Taxation, KMC delivers comprehensive IFRS transition consulting tailored specifically for FDI enterprises. Our services include:
- Step-by-step guidance from initial assessment and planning to IFRS implementation.
- Updates on the latest regulations to minimize legal risk.
- Flexible solutions aligned with your enterprise’s scale and operational needs.
Let KMC be your trusted partner—freeing you to focus on business growth while we manage your complex accounting requirements.
Contact us now for a free consultation via:
Hotlines: +84814894789 or +84919889331
Email: info@kmc.vn
Frequently Asked Questions About IFRS in Vietnam
What should FDI enterprises do to prepare for IFRS?
- Train staff in IFRS.
- Upgrade accounting software to align with international standards.
- Adjust financial reporting processes to comply with IFRS.
- Partner with advisory firms like KMC to ensure compliance.
What is the biggest challenge when adopting IFRS?
FDI enterprises may face challenges related to conversion costs, differences between Vietnamese Accounting Standards (VAS) and IFRS, and a shortage of IFRS-qualified personnel.
If FDI enterprises can overcome the technological and human resource hurdles, IFRS will be a powerful tool to bridge operations between parent companies and Vietnamese subsidiaries. Furthermore, by 2025, IFRS adoption will become mandatory. If you’re unsure how to begin the transition, consult a professional advisory firm like KMC to develop a tailored roadmap.
