[Podcast] The actual harmonization level of Vietnamese Accounting compared to that of other countries in the region – One research on the asset groups
28 August, 2024
Keywords: Accounting harmonization, practical harmonization, international accounting, ASEAN
Regional accounting harmonization is the main means of achieving unification of member countries as a single common market. This is an inevitable process in the context of internationalization of investment, trade and financial activities taking place increasingly deeply today. With this urgency, the authors from University of Economics Ho Chi Minh City (UEH) conducted one research on the topic “The actual level of harmonization of Vietnamese Accounting with other countries in the region – One research on the asset group”.

The globalization of business processes and the free movement of capital have led to an increased need for comparability of corporate financial reporting. The greatest comparability of financial statements is available at the time that all companies dealing with an accounting problem apply the same methodology.
Harmonization of international accounting is an inevitable process in the context of internationalization of investment, trade and financial activities taking place increasingly deeply today. To achieve the goal of practical harmonization, first of all, accounting regulations among countries need to be unified and the process towards achieving this unity is the harmonization process. This process includes both harmony of standards and harmony of reality. The process of harmonizing financial reporting is associated with the uniform application of accounting standards; nevertheless, the differences in the implementation of these standards affect the comparability of financial reports in practice. Actual harmonization is influenced by many factors, in which regulatory harmonization is one of the most important. Up to the present time, various national and international organizations (listed as the International Accounting Standards Committee – IASC, Financial Accounting Standards Board – FASB, European Commission – EC) as well as other Governments have been and are making efforts to increase the level of financial reporting harmonization at national, regional and global levels.
The environment affects accounting; consequently, variations in accounting regulations and practices across countries lead to diversity in accounting. The harmonization of accounting practices across countries improves the comparability of financial statements. Regional accounting harmonization is one key means of achieving unification among member countries as a single common market. The economic integration of countries within the same geographical area has an increasing role in underpinning their sustainable economic growth. The alliances have emphasized on harmonization of financial, business and financial policies. Concurrently, the amount of goods, services and cross-border capital flows in the regional economic community is increasing. For example, the Association of Southeast Asian Nations (ASEAN) represents an important, potential emerging economic group in world trade; The ASEAN Economic Community (AEC) enables the free flow of goods, services, capital, investment and human resource among member states by enacting policies that support capital transfers and reduce tariffs in ASEAN.
Facing the trend of economic globalization and deep integration in all fields, accounting is not an exception. To suit the development of the economy and the requirements for integration with international accounting practices, on May 23, 2022, the Prime Minister issued Decision No. 633/QD-TTg on approving Vietnam’s accounting and auditing strategy until 2030 which emphasizes the need for high-level integration among the Vietnamese accounting system and other countries in the region and the world. In addition to the positive moves from the Government, the researchers have started to pay attention to this topic over the past decade or so. However, these studies only focus on measuring the level of harmonization of Vietnamese accounting standards compared to that of IAS/IFRS.
Those countries in the ASEAN region have different economic, political, cultural and social environments. ASEAN must promote consistency in accounting practices in order to enable users of financial statements to understand and to compare financial reports across countries. In Vietnam, almost all researches on this topic only focuses on measuring the level of harmonization of Vietnamese accounting regulations compared to international accounting standards. There has been no research in Vietnam that has measured the level of harmonization of Vietnamese accounting regulations with the harmony of international accounting standards in the reality. Therefore, this research topic needs to be developed not only to measure the level of harmonization of practices in Vietnamese enterprises but also to expand the measurement of the level of harmonization of accounting practices between countries in the world and in Southeast Asia with the purpose of bringing a more multi-dimensional perspective on accounting harmonization.
The main objective of this study is to measure the level of harmonization in non-financial asset accounting practices among businesses in Indonesia, Malaysia, Singapore, Thailand and Vietnam. The object of the research is the level of harmony in non-financial asset accounting practices among businesses, expressed through the choice of accounting policies related to non-financial assets: inventory, fixed assets. tangible fixed assets, intangible fixed assets, investment real estate of companies in ASEAN. The survey sample was taken from 150 annual reports of the listed companies in 5 typical countries in Southeast Asia: Indonesia, Malaysia, Singapore, Thailand and Vietnam. The other 30 listed non-financial companies with the top market capitalization were selected from each of these countries’ stock exchanges. Through collecting data from the annual reports of listed companies in 2021-2022, this study measures the level of harmony in accounting practices at businesses in the region.
The research results indicate that there is a high level of accounting harmonization among the listed companies in the five ASEAN countries in terms of choosing measurement methods, depreciation of fixed assets and inventory measurement. The choice of inventory pricing and investment property accounting policies has a moderate level of harmonization and some significant differences exist among the businesses in these five countries.
In terms of the listed companies in Indonesia, Malaysia, Singapore, Thailand and Vietnam, achieving high regional harmonization in fixed asset accounting practices and inventory measurement results from the fact that most companies use the same accounting measurement methods. From the perspective of information users, a high level of harmonization of accounting practices among countries will improve the comparability of financial reports, making financial reports more useful. ASEAN countries have different economic, political, cultural and social environments; therefore, ASEAN must promote consistency in accounting practices, facilitate users of ASEAN financial reports to understand and to compare financial statements across countries. Thanks to that, investors can understand accounting information to make informed cross-border investment and financial decisions. This requires, first of all, the achievement of a certain level of normative harmonization. In addition, one prerequisite is that the financial mechanisms and macro policies of countries in the region need to have a common consensus, creating a foundation for businesses to be able to apply measurement models appropriately and effectively as well as providing useful information to relevant stakeholders.
In the recent years, most countries around the world have applied international accounting standards IAS/IFRS or adjusted their accounting regulations to be more suitable, approaching international accounting practices. Changes in accounting regulations are often expected to result in changes in practice as regulatory harmonization is considered as an important driver of harmonization in practice. In addition, regional accounting harmonization can be identified as a stepping stone towards international harmonization because of the greater uniformity of environmental factors within regional boundaries. If regional harmony is achieved, international harmony will be much easier to be obtained. In accordance with the previous studies, it is determined that there is a high level of legal harmonization in the disclosure of accounting information of ASEAN regional enterprises towards international accounting standards. However, this study has illustrated that there are still some significant differences in the actual measurement of non-financial asset information because of the differences among national environments. Therefore, the environmental factors clearly affect the application of accounting methods in Southeast Asian countries.
From the reality of investment real estate accounting in businesses in the survey sample, it can be stated that the differences in regulations and accounting practices in each country can lead to the differences in financial reporting. In Malaysia and Vietnam, despite the high level of national accounting harmonization, it is necessary to consider the reasons behind this fact because businesses do not have the foundation to determine the value of real estate. Real estate can be invested reliably; consequently, it must be measured in accordance with the historical cost model. On the other hand, the consequence of this problem is that the usefulness of information for users is reduced as the value of published information is removed far from the market. Therefore, to make information more useful, those countries in the region need to create a legal corridor for markets – including the real estate market – to operate transparently; concurrently, minimizing regulatory differences in national accounting standards (e.g., Vietnam, currently, does not allow measurement of investment real estate after initial recognition at fair value) so as to promote the process of harmonizing standards in the direction of gradually approaching and applying IAS/IFRS, resulting in the serving as one foundation for harmonizing practice.
Please refer to the full research article “The actual harmonization level of Vietnamese Accounting compared to that of other countries in the region – One research on the asset groups” on the UEH website.
Author: PhD. Tran Thi Thanh Hai – University of Economics Ho Chi Minh City (UEH)
This is an article in a series of articles spreading research and applied knowledge from UEH with the message “Research Contribution For All – Research For The Community”, UEH respectfully invites dear readers to look forward to the upcoming newsletter UEH Research Insights.
News and photos: Author group, UEH Department of Marketing and Communications

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