Recent TRG blog posts

In the previous post, we have touched upon the current issues with annual reports in Vietnam. The financial review in an annual report, including financial statements and footnotes, is of particular interest to investors. Nonetheless, there are differences between the way this section is approached in Vietnam and in Western countries such as the US and UK due to legal, social, cultural and political dissimilarities.

Annual report – As sad as it may seem, the concept of preparing/using the document is still a grey area in Vietnam. According to the Ministry of Finance, to date there are 1,690 public companies in Vietnam, 704 of which are listed in 2 stock markets. However, in 2011, only 21 out of 695 listed companies sufficiently met mandatory regulations regarding information disclosure.

The financial consolidation  process in a corporation usually begins with capturing business transactions and events and closing sub ledgers into general ledgers. It often involves reconciliations of financial statements from different subsidiaries as well as dealing with minority interest and intercompany transactions . As companies grow, so does the number of entities needing to be consolidated. The consolidation process can be complicated for corporations with multiple subsidiaries and associates, especially when their consolidation system is manual, or not integrated.

Before we discuss financial consolidation, it’s important to note the following definitions (IAS 27):

Globalisation has made the transition from VAS accounting to IFRS accounting a pressing issue for many organisations. It does not only apply to global companies operating in Vietnam but also to Vietnamese companies with foreign capital investment, which helps increase mutual understanding and trust for foreign investors, who do not have an insider’s knowledge of VAS.

“It’s an increasingly complex world” (Accenture, 2012)

Today, economic turmoil and volatility are dominant and the roles of CFOs and senior finance managers are changing. Thus, it’s critical that CFOs are able to:

In our view, companies are best served when they take an integrated approach to build an IFRS framework. Toward that end, they need a fully integrated solution ideal for supporting the IFRS adoption. A key element is the ability of enterprise applications to work in conjunction with financial management ones to meet a wide range of accounting requirements and processes mandated by the International Financial Reporting Standards. 

When Aberdeen Group conducted a study in 2011, they identified three classes of performance in corporate financial planning, budgeting and forecasting: Best-in-class, industry average and laggard. The research group outlined steps to help companies improve their performance, regardless of their current class.

Adopting IFRS alongside VAS requires technical, strategic, and operational changes. There also will be an unavoidable impact on information technology (IT) systems, as companies change the way they manage and report on numerous business activities. Hence, companies should employ a methodical approach when building the IFRS framework.

In the last post, three out of five criteria to assess business performance in relation to the corporate planning, budgeting and forecasting process were discussed. The last two, pointed out by Aberdeen Group in its 2011 study, are technology and performance management.