Your Vietnamese subsidiary keeps its books under Vietnamese Accounting Standards (VAS), but your parent company consolidates under IFRS or its own group GAAP. Every reporting period you have to bridge the two, and small gaps become large problems at consolidation. This guide explains the main differences, how to build a reliable reconciliation, and the errors that quietly distort group numbers. You will leave with a repeatable process instead of a yearly guessing game.
Why the Gap Exists
VAS is largely rule-based and closely tied to legal form and tax treatment. IFRS is principle-based and leans on economic substance and fair value. Both are legitimate, but they answer different questions. VAS asks what the documents and regulations require. IFRS asks what best reflects the economics. That difference in philosophy, not just individual rules, is the real source of most reconciling items.
Key Difference Areas to Watch
Fair value and impairment
IFRS uses fair value in many areas and requires impairment testing based on recoverable amount. VAS relies more on historical cost and specific provisioning rules. Investment property, certain financial instruments, and impairment of assets are frequent reconciling items.
Leases
Under IFRS, lessees recognize most leases on the balance sheet as a right-of-use asset and a lease liability. VAS still distinguishes finance and operating leases, keeping many operating leases off balance sheet. For a company with significant property or equipment leases, this is often the largest single difference.
Revenue recognition
IFRS applies a five-step model based on transfer of control and performance obligations. VAS revenue rules can differ in timing, especially for bundled goods and services or long-term contracts. Check cut-off and the treatment of multiple-element arrangements.
Deferred tax
IFRS requires a fuller balance-sheet approach to deferred tax, recognizing temporary differences broadly. In practice, many VAS-based books under-recognize deferred tax, so this is a recurring adjustment.
Provisions and employee benefits
IFRS may require provisions and long-term employee benefit liabilities that VAS records differently or later. Review severance and long-service obligations in particular.
Two Ways to Bridge the Gap
| Approach | How it works | Best when |
| Top-side reconciliation | Keep VAS books; adjust via a schedule of IFRS/GAAP entries at reporting date | Differences are limited and stable |
| Parallel ledger | Maintain a second set of entries so IFRS figures come directly from the system | Differences are large, frequent, or audited separately |
Most subsidiaries start with a top-side reconciliation. As transactions grow more complex, a parallel ledger reduces manual error and speeds up group reporting.
A Real Scenario
A subsidiary leased its factory and several machines under multi-year contracts treated as operating leases in VAS. At group level under IFRS, these leases belonged on the balance sheet. For two periods, the reconciliation missed them, so consolidated assets and liabilities were understated and the group’s leverage ratios looked better than reality. The fix was a standing lease schedule that recalculated the right-of-use asset and liability each period and fed the group pack directly. The lesson: recurring, structural differences need a permanent workpaper, not a one-time memo.
Common Mistakes and How to Fix Them
- Rebuilding the reconciliation from scratch each period. Maintain a rolling workpaper so opening balances carry forward and only movements change.
- Forgetting the deferred tax effect of adjustments. Almost every IFRS adjustment has a tax consequence; record the deferred tax alongside each entry.
- Treating leases as operating by default. Reassess all significant leases under the IFRS on-balance-sheet model.
- Ignoring foreign exchange differences. Confirm functional currency and translation method so rate differences do not hide inside other lines.
- No audit trail for adjustments. Document the standard, calculation, and reviewer for each reconciling item so auditors can follow it.
Action Checklist
- List every recurring VAS-to-IFRS difference for your business
- Build a rolling reconciliation workpaper with carried-forward balances
- Add the deferred tax effect to each adjustment
- Maintain a standing lease schedule under the IFRS lease model
- Confirm functional currency and translation policy with the group
- Align the reporting calendar with the parent’s consolidation deadline
- Keep clear documentation and review sign-off for each item
Conclusion and Next Step
Bridging VAS and IFRS is not a one-time project; it is a maintained process. Your next step is to list your recurring reconciling items and turn each into a standing workpaper with carried-forward balances. That single change removes most period-end stress and most consolidation errors.
Frequently Asked Questions
Can we just keep our books in IFRS to avoid the conversion?
Your statutory books and tax filings in Vietnam must follow VAS. You can maintain IFRS figures in parallel for the group, but you cannot replace the required VAS statements.
What is usually the biggest reconciling item?
For many companies it is leases, because IFRS puts most leases on the balance sheet while VAS keeps many off it. Deferred tax and impairment are also common large items.
Is Vietnam moving toward IFRS?
Vietnam has published a roadmap to adopt IFRS, allowing voluntary application by eligible entities before wider use. Until it is mandatory for you, statutory reporting still follows VAS.
Who should own the reconciliation?
Assign one accountant as owner, with review by someone familiar with both VAS and the group’s standards. Consistent ownership keeps the workpaper reliable across periods.
References
- IFRS Standards issued by the International Accounting Standards Board (IASB)
- Vietnamese Accounting Standards (VAS) and Circular 200/2014/TT-BTC on the enterprise accounting system
- Ministry of Finance of Vietnam roadmap for IFRS application