MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITYFINAL REPORT SCIENTIFIC RESEARCH TOPICS TO PARTICIPATE IN AWARD CONSIDERATION “ UEH YOUNG RESEARCHERS ” 2024 FA
Reasons for selecting topics
The economy plays a crucial role in shaping a country's progress and prosperity, as seen in Vietnam's journey through various opportunities and challenges during its integration phase To enhance economic integration, it is essential to establish transparent and fair legal frameworks Differences in accounting systems across economic, legal, and cultural contexts can hinder international investment and trade, highlighting the need for a unified approach to accounting rules and standards The International Accounting Standards Board (IASB) has spent 30 years developing the International Financial Reporting Standards (IFRS), which have gained widespread recognition and are now widely adopted globally, facilitating better comparability and information exchange.
By 2022, IFRS will be adopted in 166 countries, enhancing the quality and comparability of financial statements globally Implementing IFRS in Vietnam is crucial for aligning the local accounting system with international standards, thereby fostering economic growth Experts and authorities have recognized the importance of IFRS adoption, highlighted by Decision 345/ỌD-BTC in 2020, which marked a shift from optional to mandatory implementation for companies The COVID-19 pandemic has significantly impacted the global economy and business operations in Vietnam, yet there remain critical areas for research on this topic Acknowledging the vital role of IFRS, the authors have initiated this study.
This article examines the voluntary adoption of International Financial Reporting Standards (IFRS) in Vietnam, focusing on the factors that influence this process It also investigates the relationship between the COVID-19 pandemic and the voluntary implementation of IFRS among companies in the country.
Research objectives and questions
This research aims to analyze how specific internal factors and characteristics within enterprises, along with the influence of COVID-19, affect the intention of listed companies to voluntarily adopt IFRS effectively.
The specific research objectives of this study are:
(1) Examining the relationship between specific factors and characteristics within the enterprise and the intention to voluntarily apply IFRS of listed companies in Vietnam.
(2) Examining the relationship between COVID-19 and the intention to voluntarily apply IFRS of listed companies in Vietnam.
(3) Expanded consideration of the difference between state-owned enterprises and non state-owned enterprises in capital structure in terms of voluntary intention to apply IFRS.
(4) Based on the research results, propose appropriate recommendations in applying IFRS.
Research questions that need to be answered to achieve the goal include:
(1) How do internal business factors affect the intention to voluntarily apply IFRS of listed companies in Vietnam?
(2) How does the existence of Covid affect the intention to voluntarily apply IFRS of listed businesses in Vietnam?
(3) Is there a correlation between voluntary adoption of IFRS and state ownership in capital structure?
Research object and scope of research
This research focuses on key factors influencing the voluntary adoption of IFRS international accounting standards, including enterprise size, debt ratio, return on equity (ROE), and the type of enterprise, particularly financial institutions Additionally, it examines the impact of audit quality, the proportion of foreign ownership, foreign participation in management, foreign revenue, and the effects of Covid-19 on these dynamics.
- Space: Research was conducted at businesses listed on the Hanoi Stock Exchange (HNX) and Ho Chi Minh City Stock Exchange (HOSE).
Research Methods
The author employs quantitative methods to fulfill the research objectives, specifically conducting model tests using data gathered from audited consolidated financial statements and regular reports This analysis focuses on the audited annual accounts of listed companies in Vietnam for the years 2021 and 2022.
This study analyzes the financial statements of listed companies in Vietnam, utilizing SPSS 20 software for correlation analysis and multivariable binary logistic regression to evaluate the model's suitability It identifies factors influencing the voluntary adoption of International Financial Reporting Standards (IFRS) in Vietnam and assesses their impact levels Additionally, the authors employ the Chi-square test to compare the capital structure intentions of state-owned versus non-state-owned enterprises regarding IFRS application.
Meaning of research topic
A recent study on the adoption of IFRS among listed companies in Vietnam reveals that a significant proportion of enterprises, out of 428 surveyed, have chosen to voluntarily apply IFRS, while 16.82% have not made this decision The overall intention to adopt IFRS among Vietnamese listed companies remains relatively low This research identifies key factors influencing the decision to apply IFRS and aims to provide stakeholders with policy suggestions to facilitate quicker adoption Additionally, the findings are designed to assist businesses in understanding IFRS application and preparing adequately in terms of resources and conditions for future implementation The study also serves as a practical resource for understanding IFRS implementation in Vietnam and offers valuable insights into the effects of the Covid pandemic on this process.
OVERVIEW OF PREVIOUS RESEARCH
Factors at the enterprise level
Chow and Wong-Boren (1987) and Meek, Roberts, and Gray (1995) emphasize that scale is a critical factor in the application of accounting standards, particularly for large firms operating across diverse sectors Building on the research framework established by Chow and Meek, Kim explores these dynamics further.
M Shimaa and David c Yang (2012) provided comprehensive commentary on business environment factors such as financial resources, legal system law, level of education and cultural factors, the relationship between politics and economics, level of economic development, and the impact of inflation and taxes The research identified three concerns that have an impact on the use of IFRS: the "globalization" trend, the requirement for foreign investment (FO) and finance, and obstacles connected to each country's internal structure Costs include taxes and the expense of implementing IFRS Countries with higher inflation and capital markets will be less likely to adopt IFRS.
Research indicates that the size of a company significantly influences its accounting policy decisions during the transition from national GAAP to IFRS, with larger firms being less affected by the changes These larger enterprises incur higher costs for providing comprehensive information, as they already maintain such standards for internal control Additionally, they possess greater financial resources to implement the new accounting standards In contrast, smaller firms often find that the benefits of adopting these standards do not justify the resources needed for compliance.
"Voluntary Adoption oflFRS in Italy" by Matoni and luliano (2012), a research study of 206 enterprises (2009) to discover factors influencing voluntary adoption of
In Italy, the voluntary adoption of IFRS is influenced by factors such as dispersed ownership, the presence of foreign shareholders, financial leverage, and parent-subsidiary structures Notably, the analysis indicates that countries implementing IFRS do not necessarily experience higher levels of information asymmetry compared to those that do not adopt these standards.
“Choosing between RR 1-29 and K4 in Sweden" by Johansson and Karlsson
In a 2013 study involving 214 Swedish companies from 2011, researchers identified four key factors influencing the choice between RR 1-29 and IAS K4: foreign ownership, CEO bonuses tied to profits, revenue levels, and the reputation of auditors.
The article "Determinants of Voluntary IFRS Adoption in an Emerging Market: Evidence from Turkey" by Senygit explores the factors driving the voluntary adoption of International Financial Reporting Standards (IFRS) among non-financial firms in Turkey, based on a survey conducted between 2003 and 2004 with 206 businesses The research highlights three key determinants influencing this voluntary adoption: the size of the firms, their ambition to enhance international connections, and the quality of auditing services they receive These findings suggest that larger firms with aspirations for global integration and access to high-quality audits are more likely to adopt IFRS voluntarily, reflecting a trend towards improved audit quality in the Turkish market.
Scholars are increasingly focused on the factors affecting the adoption of IFRS in developing nations Research by Fatma Zehri and Jamel Chouaibi (2013) analyzed data from 74 developing countries as of 2008, revealing that the level of education, economic development, and existing legal systems significantly influence IFRS adoption Conversely, their study found that cultural influences, the presence of capital markets, political institutions, and the demand for international economic integration do not play a significant role in the decision to implement IFRS.
A study by Nisansala Wijckoon, Grant Samkin, and Umesh Sharma (2021) investigates the necessity of IFRS for SMEs in Sri Lanka, revealing that most SMEs do not face pressure to adopt these standards from governments or foreign partners Instead, they experience institutional pressure aimed at addressing internal business challenges, including management and accounting issues This research aims to influence policymakers and standard-setting organizations to develop a suitable reporting framework for SMEs, although it is limited by its focus on a single country.
Macro factors
Building on the framework established by Choi and Meek (2008) and further explored by Kim and David (2012), the adoption of IFRS is influenced by various aggregate environmental characteristics that shape the evolution of international accounting systems Key factors driving IFRS adoption include economic and political constraints, the legal framework (specifically common law), and a reliance on foreign borrowing, all of which underscore the necessity for enhanced capital investment amid significant capital formation and economic growth Conversely, obstacles to the adoption of IAS arise from factors such as the size of capital markets, taxation, and inflation, which elevate both political costs and the internal implementation expenses associated with transitioning to the IFRS accounting system.
Daniel and Karim (2006) highlight that the adoption of international economic norms in emerging nations is influenced by factors such as education levels, economic development rates, external economic integration, and capital market participation Their research indicates that higher literacy rates, an Anglo-American cultural influence, and well-developed financial markets significantly increase the likelihood of adopting International Accounting Standards (IAS) in these countries.
A study conducted in 2012 revealed that factors such as profitability, capital intensity, growth rate, staff productivity, and ownership structure do not significantly impact the decision to adopt voluntary international financial reporting standards These standards are increasingly being utilized by unlisted firms in the UK, particularly those classified as medium to large in size.
Political institutions play a crucial role in the economic convergence process and the global economy, as highlighted by Nobes and Parké (1995) They note that the evolution of accounting systems reflects national economic development, with economic growth prompting countries to adopt International Financial Reporting Standards (IFRS) This observation aligns with Zeghal and Mhedhbi (2006), who emphasize the increasing importance of accounting in measuring economic performance as growth accelerates The complexity and scale of corporate transactions require robust accounting systems to support economic activity Furthermore, Arpan and Radebaugh (1985) identify economic growth as a vital factor influencing the development of accounting practices and their associated social functions.
Cultural factors significantly impact the application of international accounting standards across different countries Nobes and Parker (1995) assert that nations sharing similar cultural influences tend to adopt comparable accounting standards Additionally, Chamisa highlights the importance of these cultural considerations in shaping accounting practices globally.
(2000) and Zeghal and Mhedhbi (2006) contend that emerging nations with an Anglo- Saxon culture are more likely to implement IFRS.
Macroeconomics research explores various factors such as culture, capital market size, economic development rate, capital market availability, political legality, and educational level Despite this comprehensive analysis, previous studies indicate that the impact of macroeconomic conditions on the voluntary adoption of IFRS worldwide is still inconsistent and contradictory.
Research on the benefits and challenges of applying IFRS
Implementing IFRS offers numerous advantages, such as reduced capital costs, enhanced reporting quality, and a solid framework for management decision-making Adhering to IFRS in financial statement presentation requires the Board of Directors to be more accountable in disclosing information, comprehend the nature of economic activities, and maintain prudence and comparability in the reported data.
Numerous studies indicate that the adoption of International Financial Reporting Standards (IFRS) leads to significant benefits, including reduced capital costs, enhanced financial reporting quality, and improved access to global capital markets IFRS encourages both local and foreign investments, as organizations that implement these standards tend to produce higher-quality reports compared to those adhering to local accounting practices The uniform application of IFRS fosters consistency and comparability in financial reporting, thereby enhancing the overall information environment Additionally, it improves control efficiency, lowers audit costs, and positively influences revenue management, ultimately increasing competitiveness and streamlining accounting processes.
Chen et al (2010) highlight that transitioning to IFRS can significantly enhance financial reporting by improving information quality, reducing reporting delays, and attracting foreign investments The costs associated with shifting from domestic accounting standards to IFRS are minor compared to the substantial benefits that businesses stand to gain.
(2016) found that while using IFRS is more expensive, it can greatly increase the comparability of financial statements between countries.
A review by Katta (2014) highlighted that countries adopting IFRS experience significant benefits, including enhanced competitiveness, sustainable development, and improved access to both domestic and international financing Research examining the effects of IFRS across Europe, Asia, and Africa indicated a predicted 1% improvement in the cost of capital for European companies, a modest but noteworthy enhancement considering the overall market capitalization Additionally, studies by Choi et al (2011), Lasim (2012), and Joshi et al (2016) in developing nations like Singapore, Malaysia, and Indonesia revealed a substantial increase in stock values for firms utilizing IFRS, underscoring the positive impact of standardized financial reporting on market performance.
Kilic and colleagues (2016) investigated the preparedness of 198 SMEs in Turkey for IFRS, considering factors such as enterprise size, age, auditing independence, foreign operations, and the presence of an accounting department Their findings revealed that while business age and accounting department presence have minimal impact on IFRS readiness, larger firms exhibit a higher level of preparedness IFRS for SMEs is deemed suitable primarily for substantial firms with specific goals like listing or consolidating foreign financial statements Despite its potential benefits, the study found that almost no SMEs have implemented IFRS application plans, indicating a lack of motivation among smaller enterprises A limitation of the study is the absence of financial status information, hindering the assessment of financial factors on readiness.
Implementing new accounting standards, such as IFRS, brings challenges alongside its benefits A significant issue is that financial statement users often struggle to comprehend the reported figures, leading to increased translation costs (Daske, 2006).
Research by Kim et al (2011), Bova and Pereira (2012), and Christensen (2012) highlights the necessity for greater transparency in reporting Similarly, Hellmann et al (2010) emphasize concerns regarding the validation and translation of financial information, the costs associated with implementing IFRS, insufficient training and education, significant lobbying efforts, and inconsistencies in enforcement procedures.
Research across various countries has highlighted the advantages of adopting International Financial Reporting Standards (IFRS), including enhanced integration into the global market, improved quality of financial reporting, and increased capital attraction Additionally, IFRS adoption fosters expanded business cooperation, boosts competitiveness, and enhances operational efficiency It also aids countries in reducing conversion costs and significantly improves human capital in accounting, auditing, and financial quality.
Overview of domestic research
1.2.1 Research on factors affecting the decision to voluntarily apply IFRS
1.2.1.1 Factors at the scope of domestic enterprises
As Vietnam's economy increasingly integrates into the global market, research is being conducted on the factors that influence listed companies to voluntarily adopt International Financial Reporting Standards (IFRS) Various studies have emerged, focusing on the determinants that guide the decision-making process for the voluntary implementation of IFRS among firms in Vietnam.
Vo Thi Co Diep's dissertation, titled "Factors Affecting the Decision to Voluntarily Apply International Financial Reporting Standards in Vietnam: Empirical Research on Listed Enterprises," was completed in late 2022 The research involved data collection from over [insert number] listed enterprises in Vietnam to analyze the factors influencing their decision-making regarding the adoption of these international standards.
This study analyzes 215 companies listed on Vietnam's HOSE and HNX stock exchanges, utilizing SPSS 20 software and various analytical methodologies The research identifies seven key criteria that influence the adoption of IFRS among listed firms in Vietnam, including debt ratio, profitability ratio, audit quality, and firm size, along with the presence of foreign investment, financial institutions, and foreign board members Notably, the findings reveal that audit quality and the presence of foreign directors significantly impact the decision to adopt IFRS more than other factors Additionally, the study highlights Vietnam's low adaptability and willingness to embrace voluntary IFRS application.
Nguyen Le Van Khanh's (2018) research on the factors influencing the voluntary adoption of IFRS in Vietnamese enterprises utilizes SPSS software to analyze correlations and identify key elements affecting this decision The findings reveal that industry variables, business size, and for small and medium-sized firms, ownership structure and funding sources significantly impact the adoption of international accounting standards Based on these insights, Khanh proposes practical strategies to address challenges and encourage the voluntary implementation of IFRS in Vietnam.
Hoang Manh Cuong's 2022 study, "Factors Affecting the Level of Readiness to Apply IFRS for SMEs: Empirical Research at Small and Medium-Sized Enterprises in Ho Chi Minh City," utilized a quantitative approach with a sample of 241 SMEs The survey included responses from firm owners, directors, and accountants, revealing key insights that can aid business managers in enhancing their operations The study highlights the importance of improving the transparency and integrity of financial statements, which in turn can boost investor confidence both locally and internationally Notably, three primary factors were identified as influencing the readiness to adopt IFRS: comprehension levels, awareness of benefits, and support from business owners and managers.
Research on the micro factors influencing the voluntary adoption of IFRS by enterprises in Vietnam highlights key elements such as business size, interest rates, profitability, audit quality, and foreign investment However, the studies primarily focus on isolated issues, leading to inconsistent findings Consequently, it is crucial for businesses to embrace international financial reporting standards for enhanced financial transparency and competitiveness.
Nguyen Thi Anh Linh's 2019 research, titled "Factors Affecting the Application of International Financial Reporting Standards for Small and Medium-sized Enterprises in Vietnam," explores the various factors influencing the adoption of IFRS by SMEs in Vietnam Utilizing a mixed-method approach, the study assesses and quantifies the impact of macroeconomic elements, including capital market expansion, cultural levels, international integration, and legal and political systems, on IFRS application The analysis, based on data from 448 SMEs using regression techniques, reveals significant insights into these influencing factors.
Nine key factors influence the implementation of International Financial Reporting Standards (IFRS) for Small and Medium Enterprises (SMEs) in Vietnam, including the relevance of financial statements, economic development, scale, costs and benefits of international integration, the role of professional organizations, the legal framework, the qualifications of accountants, and the interest of businesses and managers The outcomes of this project will provide valuable insights for state agencies, accounting training organizations, and SMEs, facilitating the acceleration of IFRS adoption in Vietnam.
Tran Thi Thu Thao's study, "Factors Affecting the Application of International Accounting Standards for Small and Medium Enterprises (IFRS for SMEs) at Small and Medium Enterprises in Vietnam," highlights the importance of high-quality financial statements for attracting foreign investment in Vietnam's developing economy The research involved a quantitative analysis of 122 survey samples, examining factors such as firm size, foreign operations, accountant qualifications, profits, expenses, and user engagement The findings indicate that these factors positively influence the willingness of businesses in Vietnam to adopt IFRS for SMEs.
In summary, the macroeconomic factors influencing Vietnamese firms encompass economic growth, capital markets, cultural development, integration, and the legal and political frameworks, along with the effects of professional organizations both domestically and internationally Each of these areas of study provides unique research insights.
1.2.2 Studies on the benefits and challenges of applying IFRS
Tran and colleagues (2019) undertook a series of research to investigate factors influencing the use of IFRS by listed firms on the Vietnamese stock market Collecting
In 2018, 154 audited financial statements revealed that firms have secured investments or loans, highlighting the importance of IFRS in enhancing financing opportunities and fostering international collaboration The research advocates for businesses to prioritize long-term advantages, such as increased transparency, improved reliability of financial information, heightened investor trust, attraction of foreign investments, and overall economic growth, rather than focusing solely on the immediate costs and challenges of IFRS implementation Key factors influencing this process include the debt-to-equity ratio, firm size, audit quality, foreign operations, and profitability However, Tran and colleagues' (2019) study is limited as it only examined these five factors and did not account for other potential influences, along with a sample size that may not adequately represent the broader Vietnamese enterprise landscape.
Khanh Ly's 2022 doctoral research evaluates the readiness of Vietnamese businesses to adopt IFRS, highlighting key factors such as comprehension levels, perceived benefits and challenges, and managerial support The study finds that managerial support significantly influences readiness, with business owners' positive attitudes bolstered by state assistance IFRS is perceived to enhance investment capital acquisition, financial comparison, and investor confidence, thereby increasing competitiveness However, the voluntary adoption of IFRS faces challenges, including limited training in universities, an insufficient professional accounting workforce, and the high costs and time demands associated with IFRS implementation Additionally, language barriers hinder accountants' understanding, as previous training focused on local standards rather than foreign languages The study notes that its model accounts for only 45% of readiness to adopt IFRS, suggesting the presence of unexamined factors, and acknowledges potential biases due to the convenience sampling method used in the research.
Research indicates that accountants recognize the advantages of adopting IFRS, which enhances their willingness to embrace these standards voluntarily Promoting the voluntary adoption of IFRS among businesses can highlight potential benefits, improve comparability and reliability, and facilitate capital raising in international markets This approach is likely to increase awareness and encourage active and willing implementation of IFRS.
In Vietnam, previous studies on the voluntary adoption of IFRS highlighted several advantages, such as a significant increase in income adjustments and heightened accrual reporting However, these benefits came with a notable decline in the timeliness of loss recognition Despite these findings, researchers found no substantial difference in the ability of IFRS-adopting firms compared to benchmark companies in meeting or surpassing earnings targets.
The study reveals that IFRS adoption does not enhance accounting quality, challenging previous research This conclusion is particularly relevant for companies in countries with robust enforcement, where the enforcement measures fail to compensate for the initial advantages of IFRS's flexibility compared to domestic GAAP Additionally, limited research exists on this topic due to the currently low number of organizations voluntarily adopting IFRS.
Comment on previous studies and research gaps
Numerous countries have conducted research on the factors influencing the voluntary adoption of International Financial Reporting Standards (IFRS), yet most studies focus on enterprises in nations with economic contexts that differ greatly from Vietnam's Currently, organizations in Vietnam are in a voluntary adoption phase from 2020 to 2025, with several entities possessing the necessary conditions and resources to transition to IFRS.
Recent domestic research primarily examines data up to 2021, notably the work of Vo Thi Co Diep (2022), amidst the economic instability caused by the Covid pandemic Although the economic situation improved in 2022, there remains a scarcity of studies exploring the willingness to voluntarily adopt IFRS during and after the Covid period Furthermore, limited domestic research has addressed the impact of state ownership in the capital structure on the decision to implement IFRS.
Previous studies revealed inconsistencies regarding the impact of independent variables on the voluntary adoption of IFRS Consequently, Decision No 345/QD-BTC, issued on March 16, 2020, establishes a clear roadmap for businesses to voluntarily implement IFRS from 2022 to 2025, with mandatory compliance for listed companies and large-scale enterprises thereafter.
Researching the factors that influence the voluntary adoption of IFRS among listed firms in Vietnam is essential, as it holds substantial practical implications for the current business environment.
The research team conducts a comprehensive analysis of local and foreign literature on autonomy implementation and the aspirations of public firms, while evaluating the advantages and disadvantages of adopting IFRS Through this comparative study, they identify gaps and concerns in existing research, highlighting the need to explore the factors that affect the support of business owners and managers This focus is essential for understanding their willingness to voluntarily implement IFRS, as previous studies have overlooked these critical elements.
THEORETICAL BASIS
Overview of IFRS
IFRS (International Financial Reporting Standards) are global financial reporting standards established by the IASB (International Accounting Standards Board) to promote transparency and consistency in financial statements This unified approach enhances the reliability of financial information, facilitating large international investment transactions.
The development of international financial markets necessitates a global system of standards, with International Financial Reporting Standards (IFRS) being widely accepted accounting principles The literature on the voluntary adoption of IFRS began in the late 1990s, prior to the establishment of the IASB, which replaced the less authoritative International Accounting Standards Committee (IASC) Unlike IFRS, the earlier International Accounting Standards (IAS) permitted numerous options, making greater disclosure under domestic regimes a significant barrier for companies Early research focused on signaling and reducing political costs, while institutional theory has been applied to explain the adoption of international standards The findings have guided authorities in determining the extent of IFRS implementation in their jurisdictions However, the motivations for voluntary adoption may differ now that IFRS is established, particularly in Japan, the world’s third-largest economy, known for its tradition and complex corporate relationships.
2.1.1 The formation and development process of IFRS and IASB organization
The formation and development process of the IASB
The history of International Financial Reporting Standards (IFRS) began in response to the need for a unified global framework, driven by the growth of multinational corporations following the post-World War II economic boom This development spanned over 50 years, with the implementation and application of IFRS varying across countries based on their specific needs and perspectives In 1973, the International Accounting Standards Board (IASB) was established in London, later becoming known as the International Accounting Standards Committee (IASC) in 2001.
- IASC (International Accounting Standards Committee) was established with nine members Including: United States, Netherlands, Canada, UK (United Kingdom), Germany, Australia, France, Japan, and Mexico.
- The first set of IAS (internal accounting standards) standards was issued by the International Accounting Standards Council (IASC) in 1973.
- In 1997, IASC realized it was necessary to change its operational organization to bring common accounting practices and standards to countries.
In 2000, the International Organization of Securities Commissions (IOSCO) urged its member stock markets to mandate that listed companies adhere to International Accounting Standards (IAS).
- During the period from 1973 to 2000, the International Accounting Standards Committee (abbreviated as IASC) issued International Accounting Standards (IAS) By
In 2001, the International Accounting Standards Committee (IASC) transitioned to the International Accounting Standards Board (IASB), which functions under the oversight of the founding committee of the IASC This shift led to the development of several International Financial Reporting Standards (IFRS) designed to replace and enhance outdated International Accounting Standards (IAS), addressing new issues that were previously unregulated.
On April 1, 2001, the International Accounting Standards Board (IASB) was established to succeed the International Accounting Standards Committee (IASC) During its inaugural meeting, the IASB adopted the existing International Accounting Standards (IAS) and the guidelines from the International Financial Reporting Interpretations Committee (SIC) The IASC continues to enhance and develop new standards, now referred to as International Financial Reporting Standards (IFRS).
- July 2002: The European Parliament approved an European Commission (EC) directive mandating that all of Europe apply IFRS.
- By April 2018, the number of countries and territories applying IFRS in the survey was 144/166 The remaining 22 countries have largely allowed it or are in the process of applying it.
- March 16, 2020: Ministry of Finance officially approved the project to apply IFRS in Vietnam, opening a new era for the financial accounting industry.
2.1.2 Status of IFRS applications in the world
“According to the latest data published by the IFRS Foundation from April 25,
As of August 30, 2023, a total of 166 countries and territories are either intending to apply or have adopted International Financial Reporting Standards (IFRS), representing 98% of the global Gross Domestic Product (GDP) This includes both countries that have made IFRS mandatory and those, like Vietnam, that have recently started implementation Notably, IFRS is required or permitted for listed enterprises and financial institutions in countries that collectively account for 54% of the world's GDP.
Table 2 Ì: Classification of IFRS application by region (source: IFRS.org)
2.1.3 Status of IFRS application in Vietnam
Vietnam is experiencing significant growth in commercial activities, international trade, and foreign investment, driven by a wave of administrative and institutional reforms The adoption of International Financial Reporting Standards (IFRS) is gaining traction, with strong backing from major global economic organizations like the International Monetary Fund and the World Bank This support underscores the global trend towards integrating financial reporting standards, enabling countries to prepare and present their financial statements in alignment with IFRS.
The global trend towards integration necessitates that countries, including Vietnam, develop a suitable strategy and timeline for implementing the International Financial Reporting Standards (IFRS) The Ministry of Finance issued the roadmap for applying IFRS in Vietnam in 2020.
2020, the Ministry Of Finance officially issued Decision No 345/QD, approving the project to apply Financial Reporting Standards in Vietnam.
The Ministry of Finance's decision, aligned with the "Project for Applying International Financial Reporting Standards (IFRS) in Vietnam," has been approved by the Prime Minister This initiative is based on "Decision No 480/QD-TTg dated March 18, 2013," which outlines the Accounting and Auditing Strategy for the country.
2020, Vision 203 0," the application of the IFRS standards system is implemented in 3 stages:
- Phase i: preparation phase (from 2020 to 2021)
In the preparation stage, the Ministry of finance prepares necessary conditions, such
Vietnamese; Develop and promulgate documents guiding the application of IFRS while building relevant financial mechanisms and deploying human resource training and implementation processes for businesses.
- Phase 11: voluntary application phase (from 2022 to the end of 2025)
During the voluntary application period, the Ministry of Finance will select businesses with adequate resources for financial applications The selection criteria include companies listed on the stock exchange, particularly those with significant influence within their economic sector, which may receive additional funding through international economic mechanisms Additionally, public enterprises that are not listed and other resourceful companies seeking to voluntarily implement IFRS will also be considered.
- Phase III: mandatory application phase for some subjects according to BTC regulations (after 2025)
Following the initial two phases, companies have developed and executed a pilot program tailored to their unique circumstances while voluntarily adopting IFRS The Ministry of Finance will establish specific timelines for implementation, taking into account the needs and preparedness of each business sector.
The adoption of IFRS presents both opportunities and challenges for Vietnam's management and reporting systems, particularly for listed companies It necessitates that the government, the Ministry of Finance, and businesses enhance their knowledge, skills, and human resources to effectively implement these standards.
For enterprises with 100% foreign investment:
- Listed companies (listed companies); Companies listed on UPCOM in Vietnam are large in scale and intend to sell international bonds
Companies listed on international stock exchanges, particularly technology unicorns, must adhere to the regulations of their host countries by preparing financial statements in accordance with International Financial Reporting Standards (IFRS).
- At the request of investors, foreign strategic shareholders are the reason why many listed businesses apply IFRS.
The Ministry of Finance emphasizes that adopting International Financial Reporting Standards (IFRS) is essential for Vietnamese businesses, as it not only enhances the macroeconomy but also attracts high-quality foreign investment, fostering economic development and international integration IFRS serves as a vital tool for effective budget management and improves transparency during the integration process, facilitating necessary reforms in state mechanisms Furthermore, the application of IFRS is a key criterion for international organizations, positively impacting Vietnam's stock market ranking on the global stage.
Background theories
The theory of planned behavior, developed by Ajzen and Fishbein in 1975, posits that individual behaviors can be predicted and explained through data and behavioral tendencies Building on the earlier theory of reasoned action, Ajzen expanded this concept in 1985, leading to the formulation of the theory of planned behavior, which remains influential in understanding behavioral intentions.
The Theory of Reasoned Action (TRA) focuses on understanding behavioral intentions and the voluntary decisions made by individuals to engage in specific actions It posits that these intentions are influenced by two key factors: the individual's attitude towards the behavior and the social norms that shape their actions, which include awareness of social pressures (subjective norms) This theory can be visually represented as shown in Figure 2.1.
Figure 2 Ì: Theory of reasoned action mode!
(Source: Ajzen and Fishbein, 1980, cited in Davis et al., 1989)
Figure 2.2: Theory of planned behavior (TPB) model
(Source: Ajzen (1985) Figure 1 and Ajzen (1991) Figure 1
TPB is a model that describes how people want to form intentions and carry out actions based on three main factors: attitudes, subjective norms, and perceived behavioral control.
The Theory of Planned Behavior (TPB) enhances the Theory of Reasoned Action (TRA) by introducing Perceived Behavioral Control (PBC) alongside Attitude (Ab) and Subjective Norm (SN) These three components—Attitude, Subjective Norm, and Perceived Behavioral Control—serve as the foundation for influencing behavioral intentions They reflect the willingness of businesses to adopt specific behaviors, such as the voluntary implementation of International Financial Reporting Standards (IFRS) by listed companies in Vietnam.
The theoretical model is effectively utilized to analyze individual behavior and decision-making in detail, highlighting the strong correlation between behavioral change awareness and the intention to protect the environment, with social pressure playing a lesser role The Theory of Planned Behavior (TPB) is particularly suited for predicting and explaining human actions, serving as the foundational framework for understanding decisions related to the application of IFRS international accounting standards by publicly listed enterprises.
The theory of planned behavior identifies three key factors—human attitudes, subjective norms, and perceived behavioral control—that influence behavior change It emphasizes the role of social pressure and awareness in shaping decisions In the context of Vietnam, this theory elucidates the micro factors within companies that affect managers' voluntary adoption of International Financial Reporting Standards (IFRS) Specifically, it highlights how the behaviors of the board of directors and managers can significantly impact the decision to implement IFRS voluntarily.
The theory of delegation explores the dynamics between principals and agents, emphasizing their mutual goal of maximizing benefits However, to align with corporate interests, agents must prioritize the principal's needs, leading to potential conflicts of interest This framework is particularly relevant in understanding owner-agent relationships in business management (Jensen and Meckling, 1976).
Delegation theory has been extensively applied in research globally, including studies by Jermakowicz (2004) that examine the voluntary adoption of IFRS standards in Belgium and Vietnam Furthermore, Jermakowicz et al (2006) explored the European market, highlighting the significant impact of international accounting standards in the context of globalization.
The delegation relationship significantly influences international accounting strategies and shareholder objectives by impacting asset conversion and cost creation for businesses Consequently, proxy theory underscores the importance of leverage, particularly debt ratio, in shaping the decision to voluntarily adopt international accounting standards.
The theory highlights the importance of establishing a proxy relationship with foreign markets to maximize profits for businesses To attract foreign investment, companies must provide clear and transparent financial statements that align with international standards This requires agreement among shareholders and authorized parties to adopt international accounting standards, which fosters trust and enhances external funding opportunities Consequently, this theory serves as a foundation for understanding the influence of foreign investment on the adoption of IFRS by businesses.
As globalization continues to shape the business landscape, Vietnamese companies are increasingly seeking financial experts and skilled leadership to navigate diverse policies and strategies To effectively provide financial information in line with global standards, the adoption of international accounting standards is essential Vietnam is actively pursuing a transition to these standards, and the research team posits that the involvement of foreign board members will significantly influence the commitment to implementing international accounting practices.
The implementation of international accounting standards (IFRS) enhances the welfare of managers appointed by shareholders, positively influencing the book value, equity, and profits of businesses By optimizing profits for owners, the application of these standards aligns with the proxy theory proposed by the research team, which highlights a significant relationship between profitability ratios, such as Return on Equity (ROE), and the intention to adopt international accounting standards.
Delegation theory serves as the theoretical basis for our research team to identify key factors influencing the intention to adopt international accounting standards These factors include debt ratios, levels of foreign investment, the involvement of foreign countries, profitability ratios, and the participation of foreigners on management boards.
2.2.3 Theory of corporate governance (CG)
Corporate governance (CG) is defined by Shleifer and Vishny (1997) as the framework that ensures investors benefit from their investments Similarly, Caramanolis-Cotelli (1995) emphasized that corporate governance involves the allocation of capital and assets among various stakeholders, including the Board of Directors, the general director, and external investors, thereby highlighting its role in company management.
Shlcifcr et al (1997) conducted extensive research on corporate governance, examining factors such as concentrated ownership, institutional influences, and the roles of senior managers in enhancing corporate and shareholder value Charreaux (1997) defines corporate governance as a framework of organizational mechanisms that establish authority and guide management decisions, aiming to minimize misrepresentation and discrepancies in accounting Mathiesen (2002) emphasizes that corporate governance focuses on effectively managing a company through contracts, organizational structures, and regulations Typically, it aims to improve financial performance by motivating corporate managers to yield better returns on investment Morck (2005) explored the varying characteristics of corporate governance models and identified several influencing factors, including philosophy, ethics, ideology, law, politics, nepotism, and the development of financial markets.
Dumontier et al (1998) explored the impact of international accounting standards on accounting information, revealing that financial statements align more closely with domestic standards to mitigate information asymmetry, particularly among listed companies in Europe Additionally, Barth et al (2013) found a strong correlation between financial statements and profitability under international accounting standards, indicating that firms adhering to these standards are less likely to engage in profit management practices to meet their objectives.
Macro-scale factors affecting the decision to voluntarily apply IFRS
Besides business factors, COVID-19 is considered a potential factor in affecting the economic environment as well as the international accounting standards of businesses during that period.
2.4.1 The existence of the Covid pandemic
Since the onset of the COVID-19 pandemic in Vietnam in February 2020, its effects have persisted into 2021 and 2022, significantly impacting economic and social life The service sector, in particular, has faced severe challenges, leading to numerous obstacles for businesses, households, and individuals As a result, companies have invested over a year in preparing to implement IFRS, but the pandemic has adversely affected their operations According to the General Statistics Office, in 2021, approximately 54,960 businesses temporarily suspended operations, representing 18%, while 16,741 businesses dissolved, equating to about 4,000 businesses Although the BTC issued a guidance project in 2020, research indicates that the legal environment plays a crucial role in influencing voluntary adoption of these standards.
The article "Accounting for Provisioning for Expected Credit Losses According to IFRS 9 - Issues to Consider for Vietnamese Commercial Banks During the Covid-19 Period" highlights the negative impact of Covid-19 on the credit quality of the Vietnamese banking system While the on-balance sheet bad debt ratio remains below 2%, there is a noticeable upward trend, and the pandemic has complicated the management of bad debts Additionally, inflation poses challenges to the transition to IFRS within the accounting framework, as noted by Kim et al (2012) The evolution of the accounting system is closely linked to national economic development, with countries adopting IFRS driven by economic growth (Nobes et al., 1995) As regions experience higher economic growth rates, the importance of accurate financial measurement increases (Zeghal et al., 2006) Consequently, the ongoing effects of Covid-19 are expected to influence businesses' willingness to voluntarily adopt IFRS in Vietnam.
119: Businesses affected by co VID have a negative impact on the intention to apply IFRS international standards.
Proposed model
The research team developed a model to explore the relationships among nine independent variables: enterprise size (ỌMD), financial institution (TTC), audit quality (CKT), debt ratio (TLN), foreign investment (ĐTN), foreign participation on the Board of Directors (NNN), return on equity (ROE), foreign revenue (FR), and the presence of COVID (Covid) This model aims to analyze their impact on the voluntary adoption of IFRS by businesses (IFRS), assessing both direct and indirect effects.
Chapter 2 provides a research paper that introduces a general overview of international accounting standards, starting from the formation and development as well as the application situation of IFRS in Vietnam and countries around the world The study presents the benefits of applying international accounting standards as well as challenges that companies may encounter that affect the voluntary application of international accounting standards The group presented basic theories that are useful and appropriate to the topic to serve as a basis for research on factors affecting the decision to apply IFRS principles at listed companies in Vietnam, including: theory Theory of planned behavior, delegation theory, corporate governance theory, signaling theory At the same time, explain and systematize previous research results on factors affecting the decision to voluntarily apply IFRS Create a basis for the group to choose and provide direction for presenting research in the next chapter.