Readiness of IFRS Adoption by Multinational Corporations in Vietnam: A Comparative Case Study

Abstract

Purpose – The study aims to document and highlight the benefits and challenges of adopting International Financial Reporting Standards (IFRS) by multinational corporations (MNC) in Vietnam. Design/methodology/approach – A case study methodology was used to describe the process of IFRS preparation on the voluntary basis by two MNC in Vietnam, one originates from Europe (where IFRS is fully adopted since 2005) and the other is from the United States (where complies with US GAAP). We employ a theoretical framework that incorporates some elements of the 7P model proposed by Carnegie and Napier (2002). This framework analyses the issues under study in terms of seven dimensions: period, places, people, practices, propagation, products and profession. Findings – Although IFRS is not required for foreign owned enterprises in Vietnam, it is recognised as a valuable tool to improve the comparability, transparency, and reliability of financial statements. Additionally, many of the problems that hinder the adoption of IFRS are related to institutional factors rather than the technical aspects of the standards itself. Several factors are pertinent to ensure the success of IFRS adoption: top management support, simplifying the IFRS implementation process, sourcing suitable IFRS complied accounting software, and finally, ensuring that all affected employees understand and actively support the adoption process. Originality/value – The findings have significant implications for Vietnamese accounting standard setters and companies that want to early adopt IFRS. The problems highlighted may help companies planning to adopt IFRS by 2020 to better address these issues.