Module 7:

Principal differences between

IFRS and VAS
 What you will learn?

 Preparation of financial statements

 Revenue recognition
 Property, Plant and Equipment
 Business combinations
 General approach
Diffenrence in base of IFRS and VAS

Principles- Rules-
based
IFRS VAS based
 Preparation of financial statements
Statement of Cash Flow

IAS 7 - Statement of cash flow VAS 24 - Cash flow statements

 Bank overdrafts which are  Silent on these areas.
repayable on demand form an
integral part of an entity's cash  Under Circular 200, bank overdraft
management and included as a is guided to be presented in cash
component of cash and cash flows statement in a way similar to
equivalents. bank loans.

 Cash flows from future, forward,

option and swap contracts are
classified as investment activities
except when the contracts are for
trading purpose or when a
contract is accounted for as a
hedge of an identifiable position.
 IAS 7 enables users of FSs to
evaluate changes in liabilities
arising from financing activities
and require to disclosed separately
from changes in other assets and
liabilities.
 Preparation of financial statements
Accounting policies, changes in accounting estimates and errors

IAS 8 - Accounting policies, changes VAS 29 - Changes in Accounting

in accounting estimates and errors Policies, Accounting Estimates and
Errors
 In the absence of an IFRS that  Silent on the unclear areas.
specifically applies, management
shall use its judgement in
developing and applying an
accounting policy that results in
information that is relevant and
reliable to the users.
 Management shall refer to the
following sources in descending
order:
- the requirements in IFRSs
dealing with similar and
related issues; and
- the definitions, recognition
criteria and measurement
concepts for assets, liabilities,
income and expenses in the
Framework.
 Preparation of financial statements
Accounting policies, changes in accounting estimates and errors

IAS 8 - Accounting policies, changes VAS 29 - Changes in Accounting

in accounting estimates and errors Policies, Accounting Estimates and
Errors
 If a change in accounting policy  If a change in accounting policy is
resulting from the initial required by a new accounting
application of an IFRS, the change guidance and if the new
is accounted for in accordance accounting guidance does not
with the specific transitional include specific retrospective
provisions in that IFRS. requirement, the change in
accounting policy is commonly
 In the absence of any specific applied prospectively.
transitional provisions, the change
shall be applied retrospectively.
 In the intervening period, where a  There is no requirement to
new/revised standard that is disclose new/ revised
relevant to an entity has been standards/guidances in VAS when
issued but is not yet effective, these new/ revised standards/
management discloses this fact guidances are not yet effective.
and the known or reasonable
estimable the impact on the
period of initial application.
 Preparation of financial statements
Events after the reporting period

Events after the Reporting

IAS 10 - Events after the reporting period
Period – VAS 23
Date of authorisation for issue
 Determination of the date the FSs are  Silent on the
authorized for issue depending upon the determination of the date
management structure, statutory when the financial
requirements and procedures. statements are authorised
for issue under different
 If an entity is required to submit its FSs to management structures
its shareholders for approval after issuing, and procedures.
the FSs are authorised for issue on the
date of issue, not the date when  The issuing date is the date
shareholders approve. when the head of the
reporting entity authorizes
 If the non-executives management is the issue of the financial
required to issue the FSs to a supervisory statements to outsiders
board for approval, the FSs are authorised
for issue at the date of issuance to the
supervisory board.
 In case of partially announcements,
events after the reporting period include
all events up to the date when the FSs are
authorised for issue.
 Preparation of financial statements
Events after the reporting period

IAS 10 - Events after the reporting Events after the Reporting

period Period – VAS 23
Adjusting events after the reporting period
 Requires to adjust for profit-sharing  Silent.
or bonus payments which are
determined after the reporting
period, if the entity had a present
legal or constructive obligation at the
end of the reporting period to make
such payments as a result of events
before that date.
 Preparation of financial statements
Consolidated financial statements

VAS 25 – Consolidated Financial Statements

and Accounting for Investments in Subsidiary
IFRS 10 – Consolidated
financial statements Circular 202 – Guidance on the preparation
and presentation of consolidated financial
statements
 Prescribes requirements VAS 25:
for the preparation and
presentation of  Based on the previous version of IAS 27
consolidated FSs,  Provides guidance on the preparation of
requiring entities to consolidated FSs and the accounting for
consolidate entities it subsidiaries in the parent’s separate
controls. financial statements.
Circular 202:
 Gives further guidance on preparation and
presentation of consolidated financial
statements
 Preparation of financial statements
Consolidated financial statements
VAS 25 – Consolidated Financial
Statements and Accounting for
IFRS 10 – Consolidated financial Investments in Subsidiary
statements Circular 202 – Guidance on the
preparation and presentation of
consolidated financial statements
 When assessing whether an  Circular 202 does not mention
investor controls an investee, an about principal or agent in the
investor with decision-making context of determining the controls.
rights determines whether it acts
as principal or as an agent of
other parties based on a number
of factors.
 When an entity meeting a  VAS 25 and Circular 202 do not
criteria of an investment entity, provide guidance on investment
it is prohibited from preparing entities.
consolidated financial
statements, instead, it accounts
for an investment in a subsidiary
at fair value through profit or
loss in accordance with IFRS 9 –
Financial Instrument.
 Preparation of financial statements
Consolidated financial statements
Circular 202 – Guidance on the
IFRS 10 – Consolidated financial preparation and presentation of
statements consolidated financial
statements
 An entity needs not present  Circular 202 provides similar
consolidated FSs if: conditions as IFRS 10.
 Circular 202 further required
- it is a wholly-owned subsidiary or is a that the exempted entity:
partially-owned subsidiary of
another entity and its other owners; - not be a State Owned
Enterprise or entity with
- its debt or equity instruments are majority interest from the state;
not traded in a public market;
- have the immediate parent
- it did not file, nor is it in the process company which is preparing
of filing, its FSs for the purpose of consolidated financial
issuing any class of instruments in a statements to comply with VAS.
public market, and
- its ultimate or any intermediate
parent produces FSs available for
public use that comply with IFRSs, in
which subsidiaries are consolidated
or are measured at FVTPL in
accordance with IFRS 10.
 Revenue recognition
Revenue from contracts with customers
IFRS 15 – Revenue from Contracts No equivalent VAS
with Customer
 Effective from 1 January 2018,  Follow guidance under
 Replaces: − VAS 14 - Revenue and other
− IAS 11 - Construction Contract, income
− IAS 18 – Revenues
− Other previous interpretations − VAS 15 - Construction contracts
on revenues.
 Revenue is recognized when
control transfers to customer
 A 5 step process to recognize
revenue:
− Identify the contract with
customer
− Identify the separate
performance obligations
− Determince contract price
− Allocate contract price to each of
separate performance obligation
− Recognize when each
performance is satisfied
 Revenue recognition
Revenue from contracts with customers
IFRS 15 – Revenue from Contracts No equivalent VAS
with Customer
 Key changes to previous revenue  Certain guidance under IFRS 15
recognition practice: which have been included in
− Any bundled goods or services guidance provided under
that are distinct must be Circular 200:
separately recongised − Revenues on sales transactions
− Revenues may be recognised which are bundled with free
earlier than under the previous products/services
standards (IAS 11 and IAS 18) − Revenues on real estate sales
− The point at which revenue is are not allowed to apply VAS 15,
able to be recognised may shift but follows the conditions of
− There are new specific rules on risks and rewards transfers for
licenses, warranties, non- sales of goods as guided under
refundable upfront fee, and VAS 14
consignment arrangements − Revenues on transactions with
customers under loyalty
programmes
− Revenues on construction
contracts to take into account
variable considerations.
 Balance Sheet and Related Notes
Property, Plant and Equipment

IAS 16 – Property, Plant and VAS 03 – Tangible Fixed Assets

Equipment
Initial recognition
 An item of PPE that qualifies for  Guidance on dismantlement,
recognition as an asset shall be removal and restoration costs
measured at its cost: are silent in VAS 03.
− purchase price  Subsequent guidance which
− costs directly attributable to alter the requirements of VAS
bringing the asset to the location 03:
and condition necessary to operate − Circular 45: a minimum
− initial estimate of the costs of capitalisation threshold for a
dismantling and removing the item fixed asset of VND30 million.
and restoring the site on which it is − Circular 200: the estimation
located of restoration costs
 Balance Sheet and Related Notes
Property, Plant and Equipment

IAS 16 – Property, Plant and VAS 03 – Tangible Fixed Assets

Equipment
Measurement after initial recognition
 IAS 16 allows 2 accounting models:  Only allows cost model.
− Cost model: The asset is carried at  The assets are determined
cost less accumulated depreciation according to their historical
and impairment costs, accumulated
depreciation and residual
− Revaluation model: The asset is values.
carried at a revalued amount, being
its fair value at the date of
revaluation less subsequent
depreciation and impairment
 Balance Sheet and Related Notes
Property, Plant and Equipment
IAS 16 – Property, Plant and VAS 03 – Tangible Fixed Assets
Equipment
Impairment
 PPE is subject to  Impairment/write down of PPE is not
impairment assessment. allowed under VAS 3 unless there is a
 Applies IAS 36 - reappraisal according to the State’s
Impairment of Assets to regulation.
determine whether an
item of property, plant
and equipment is
impaired
Residual value and useful life
 The residual value and  Silent in terms of the review of residual
useful life is required to value at each financial year end
be reviewed at least at  Requires the review of useful life at year
each financial year-end end
and if expectations differ  Circular 45 provides additional guidance:
from previous estimates − silent on residual value, depreciation is
 The change(s) shall be the method of allocating the asset’s cost
accounted for as a change over its useful life.
in accounting estimate − prescribes specific range of useful life for
each group of assets
 Investments
Business combinations

IFRS 3 – Business combinations VAS 11 – Business combinations

Goodwill
 No amortization  Amortised on a systematic basis
over its expected useful life, not
 Annual impairment review or to exceed 10 years
more frequently if there is an
indication of impairment  Annual impairment review
Non-controlling interest
 Measure at the acquisition date  Only the proportionate interest
components of NCI in the method is allowed under Circular
acquiree on acquisition-by- 202
acquisition basis, either at the
NCI’s proportionate share of the
recognised amounts of acquiree’s
identifiable net assets or at fair
value
 Goodwill includes amounts
attributable to the noncontrolling
interest