Formal accounting harmonization - A new measurement scheme demonstrated by Vietnam’s data and international financial reporting standards

egulations with international conventions, 
and disconfirm the results found by previous 
studies. 
Seven accounting items are totally 
converged. These accounting items mainly 
relate to liabilities such as deferred tax 
liabilities, financial lease liabilities, and 
provision and contingent liabilities. Two 
accounting items relate to asset category such 
as financial lease assets and investments in 
joint venture. One item, the borrowing cost, 
relates to expense. 
Revenue shows a harmonization degree of 
80%. Differences is reasoned by fair value 
evaluation of future benefit of revenue. For 
items such as non-current asset held for sales/ 
discontinuing operation, investment after 
losing controlling power, non-control interest, 
though both regulations have the same 
principles for initial recognition, only 50% of 
those are regarded as similar. Therefore, their 
overall convergent level is 50%. 
Table 2 
Research findings 
No 
Variables 
(Accounting 
items) 
IFRS & UAG IFRS & VAS UAG & VAS 
Ini- Sub- Overall Ini- Sub- Overall Ini- Sub- Overall 
1 Inventories 1.00 1.00 1.00 1.00 0.88 0.88 1.00 0.88 0.88 
2 
Tangible 
fixed assets 1.00 0- - 1.00 - - 1.00 1.00 1.00 
3 
Intangible 
fixed assets 1.00 - - 1.00 - - 1.00 1.00 1.00 
4 
Investment 
properties 1.00 - - 1.00 - - 1.00 1.00 1.00 
5 
Financial 
lease assets 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 
6 Non-current 1.00 0.50 0.50 1.00 0.50 0.50 1.00 1.00 1.00 
 Formal accounting harmonization - A new measurement scheme demonstrated by... 43 
No 
Variables 
(Accounting 
items) 
IFRS & UAG IFRS & VAS UAG & VAS 
Ini- Sub- Overall Ini- Sub- Overall Ini- Sub- Overall 
asset held for 
sales/ 
discontinuing 
operation 
7 
Financial 
assets 0.33 - - - - - 0.33 0.50 0.17 
8 
Employee 
benefit assets - - - - - - 1.00 1.00 1.00 
9 
Deferred tax 
assets 1.00 - - 1.00 0.50 0.50 1.00 - - 
10 
Financial 
debts 0.50 0.17 0.08 - - - 0.50 0.67 0.33 
11 
Deferred tax 
liabilities 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 
12 
Financial 
lease 
liabilities 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 
13 
Employee 
benefit 
liabilities 0.25 0.25 0.06 - - - 0.75 0.75 0.56 
14 
Liabilities 
from dividend 
payment 1.00 - - 1.00 - - 1.00 1.00 1.00 
15 
Provision, 
contingent 
liability 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 
16 Revenue 0.80 N/A 0.80 1.00 N/A 1.00 0.80 N/A 0.80 
17 
Borrowing 
cost 1.00 N/A 1.00 1.00 N/A 1.00 1.00 N/A 1.00 
18 Goodwill - - - - - - 1.00 - - 
19 
Investments 
in Joint 
venture 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 
20 
Investment 
after losing 
controlling 
power 1.00 0.50 0.50 1.00 - - 1.00 0.50 0.50 
21 
Investment in 
subsidiaries – 
Separate 
statement - 0.33 - - 0.33 - 1.00 0.67 0.67 
22 Investment in - 0.33 - - 0.33 - 1.00 0.67 0.67 
44 Journal of Science Ho Chi Minh City Open University – VOL. 21 (1) 2017 – April/2017 
No 
Variables 
(Accounting 
items) 
IFRS & UAG IFRS & VAS UAG & VAS 
Ini- Sub- Overall Ini- Sub- Overall Ini- Sub- Overall 
associates – 
Separate 
statement 
23 
Investment in 
joint ventures 
– Separate 
statement - 0.33 - - 0.33 - 1.00 0.67 0.67 
24 
Investment in 
subsidiaries – 
Consolidated 
statement - 1.00 - - 1.00 - 1.00 1.00 1.00 
25 
Investment in 
associates – 
Consolidated 
statement - - - - - - 1.00 1.00 1.00 
26 
Investment in 
joint ventures 
– 
Consolidated 
statement - - - - - - 1.00 1.00 1.00 
27 
Non-control 
interest 0.50 1.00 0.50 0.50 0.50 0.25 1.00 0.50 0.50 
Overall results 0.61 0.42 0.35 0.57 0.38 0.34 0.94 0.79 0.77 
Note: Ini – Initial 
recognition; Sub-: 
subsequent 
recognition 
Other items are recorded as mostly 
divergent. These items could be divided into 
3 groups: (1) items diverging in initial 
recognition, (2) items diverging in subsequent 
recognition, and (3) items diverging in both 
initial and subsequent recognition. The first 
group relates to investments in associates, 
joint ventures and subsidiaries in separate 
financial statements. For initial record of these 
items in financial statements, UAG requires 
that costs such as legal fees, commission for 
dealer must be included in costs of those 
investments while in IFRSs (IAS 27 and IFRS 
3) such costs are excluded. The difference in 
subsequent recognition existing in these items 
are interesting. To record these items, 
accountants can use historical cost method, 
equity method or fair value method. Both 
regulations allow to use the first method but 
only IFRS allows the latter two. This study is 
aware of the fact that VAS does not mention 
equity method but UAG does. Whereas, UAG 
provisions do not allow impairment 
recognized while IAS 27 does. Moreover, 
IFRS 9 also stated that these accounting items 
could be considered as equity instruments, 
thus could be recognized at fail value. 
The second group includes tangible fixed 
assets, intangible fixed assets, investment 
properties, deferred tax assets, financial 
 Formal accounting harmonization - A new measurement scheme demonstrated by... 45 
assets, and liabilities from dividend payment. 
According to IFRS, impairment is allowed if 
those assets are recorded via historical cost 
model. Fair value valuation is allowed if those 
assets are recorded via revaluation model. 
These provisions are not allowed by UAG. It 
is also true for liabilities from dividend 
payment, which must be re-evaluated annually 
according to changes in its fair value. 
The third group presents items diverging 
in both initial and subsequent recognition. 
This includes employee benefit assets, 
goodwill, and investment in associate and 
joint venture in consolidated financial 
statements. Goodwill in both regulations 
requires that acquisition method must be 
employed. But the application of this method 
is varied. In terms of investments in 
consolidated financial statements, impairment 
is the main force making the regulations 
diverging. Employee benefit asset is a 
different case when UAG does not use any 
provision for this item. 
This research also finds that Vietnam 
authority has made some efforts to integrate 
IFRS into the national accounting regulations. 
33% of accounting principles has been 
improved. However, the actual impact of 
these innovation on harmonization degree is 
inconsiderable taking up from 34% to 35%. 
These findings affect the de factor 
harmonization in accounting of Vietnam 
enterprises with those employed IFRSs. 
Consequently, the comparability of 
accounting numbers is still weak. 
Discussion 
It could be said that assets valuation is the 
main force making Vietnam accounting 
regulation diverging from international 
convention and practices. Further 
investigation made on diverging accounting 
items, this study finds three main reasons why 
the two regulations diverge. First, IFRS 
allows to use fair value in revaluation model 
to measure assets after initial recognition, 
acquisition method and equity method to 
measure investments in subsidiaries, 
associates and joint ventures. Second, the 
application of measuring method is different. 
This explains the variety in the measurement 
for investment for equity instrument, non-
controlling interest and goodwill. Third, there 
is a lack of provisions for items such as 
employee benefit and financial instruments. 
5. Conclusion 
The findings show the similarity level of 
Vietnam accounting regulation, calculated by 
considering both initial and subsequent 
recognition, is much lower than previous data 
collection schemes because initial and 
subsequent recognition collectively affect 
accounting numbers in financial statements. 
The new approach is more appropriate to 
compare accounting regulations. This raises 
the question about validity of previous 
research in the theme 
References 
Brown, P. (2011). International Financial standards: What are the benefits? Acccounting and Business Research, 
41(3), 269-285. 
Garrido, P., León, Á., & Zorio, A. (2002). Measurement of formal harmonization progress: The IASC experience. 
International Journal of Accounting, 37(1), 1-26. 
IASB. (2016). Mission statement. Retrieved from 
IASB.aspx 
Mustata, R. V., Matis, D., Bonaci, C. G., & Strouhal, J. (2010). Econometric tools Used in Measuring Accounting 
Harmonization: A Necessity Imposed Through Globalization. The 5th WSEAS International Conference on 
Economy and Management Transformation. Timisoara, Romania: West University of Timisoara. 
Paul, P., Hans, K., & Jan, K. (1999). Doing a Research in Political Science: An introduction to comparative 
methods and statistics (1st ed.). London: SAGE Publications. 
46 Journal of Science Ho Chi Minh City Open University – VOL. 21 (1) 2017 – April/2017 
Pham, H. H. (2012). A comparative study of Vietnamese and international accounting standards. Ph.D paper. 
Retrieved from 
era02&object_id=192069 
Rahman, A., Perera, H., & Ganeshanandam, S. (1996). Measurement of Formal Harmonization in Accounting: An 
Exploratory Study. Accounting and Business Research, 26(4), 325-339. 
Rodrigues, L. L., Fontes, A., & Craig, R. (2005). Measuring convergence of National Accounting Standards with 
International Financial Reporting Standards. Accounting Forum, 29, 415 - 436. 
Tay, J., & Parker, R. (1992). Measuring International Harmonization and Standardization: A Reply. Abacus, 28(2). 
Van der Tas, L. G. (1988). Measuring Harmonization of Financial Reporting Practice. Accounting and Business 
Research, 18(70), 157-169. 
Van der Tas, L. G. (1992). Evidence of EC financial reporting practice harmonization: The case of deferred taxation. 
European Accounting Review, 1(1), 69-104. 
Irvine, H. (2008). The global instituationalization of financial reporting: The case of the United Arab Emirates. 
Accounting Forum, 125-142.