On 18 August 2026, the Ministry of Finance officially issued Circular No. 118/2026/TT-BTC, providing guidance on the entities, scope and procedures for applying International Financial Reporting Standards (IFRS) in Vietnam.
Under Circular 118, enterprises and economic organizations that are members of the Vietnam International Financial Centre (VIFC) and have the need, capability and resources may voluntarily elect to apply IFRS in preparing and presenting their separate and consolidated financial statements. This marks an important step towards establishing a financial reporting environment at VIFC that is more aligned with international practices.
The Circular takes effect from 1 January 2027 and applies to financial years beginning on or after that date. However, for businesses planning to adopt IFRS from 2027, 2026 is the year to start preparing – from accounting policies and data to systems and people.
So, what should businesses pay attention to, and how should they prepare? Below are four key considerations and KTC’s recommended three-step roadmap.
FOUR KEY CONSIDERATIONS FOR VIFC BUSINESSES
1. Voluntary adoption, but strict compliance with the applicable requirements
VIFC member enterprises may voluntarily elect to apply IFRS based on their information transparency needs and available resources. However, once the decision is made, businesses must comply with the requirements set out in Articles 2, 3 and 5 of Circular 118/2026/TT-BTC, including:
- Apply the standards in full: The international accounting standards must be applied in their original form, without modification or selective application.
- Apply consistently: The adoption or discontinuation of the international accounting standards may only take effect from the beginning of the following accounting period. Businesses may not switch accounting frameworks partway through a financial year.
- Notification requirement: Businesses must notify the Ministry of Finance in writing within 30 days prior to the date of adoption or discontinuation, and clearly state their compliance with IFRS in the notes to the financial statements.
2. IFRS does not replace tax obligations in Vietnam
Under Articles 1 and 5.2 of the Circular, preparing and presenting financial statements under IFRS does not change the basis for determining a business’s tax obligations to the Vietnamese State.
Accordingly:
- Businesses must continue to fulfill their tax obligations in accordance with Vietnamese tax laws.
- In practice, businesses should establish a reconciliation mechanism between IFRS accounting figures and the tax base, and address resulting differences under the relevant IFRS requirements, including IAS 12 – Income Taxes.
Key message: Adopting IFRS does not mean operating outside Vietnam’s tax framework.
3. Strict requirements on financial statement submission
Under Article 4 of the Circular, VIFC member enterprises applying to IFRS must submit their financial statements to:
- The VIFC Executive Authority;
- The VIFC Supervisory Authority;
- Other competent Vietnamese authorities as required by law.
The reporting period and filing deadlines must also continue to comply with applicable Vietnamese accounting regulations.
4. The role of IFRS 1 makes 2026 a critical transition year
For businesses transitioning to IFRS and required to present comparative information, IFRS 1 – First-time Adoption of International Financial Reporting Standards will provide the fundamental framework for the transition process.
For businesses with calendar-year financial years that elect to adopt IFRS from 2027 and present 2026 comparative figures, the transition date would, in principle, be 1 January 2026. Therefore, the data and adjustments required for IFRS should be prepared during 2026.
WHERE CAN IFRS IMPACT BUSINESSES?
- Financial reporting: Significant differences between VAS (Vietnamese Accounting Standards) and IFRS in recognition and measurement – including fair value, impairment testing, complex financial instruments and lease accounting under IFRS 16 – can materially change the presentation of the Statement of Financial Position and statement of profit or loss.
- Financial metrics: Key indicators such as EBITDA, Debt-to-Equity, net assets and financial covenants under loan agreements may be directly affected. Businesses should review their existing financing and credit agreements with banks in advance to avoid potential breaches of financial covenants following the transition.
- Data and ERP systems: IFRS requires highly detailed supporting and disclosure information. Accounting and ERP systems should therefore be assessed for their ability to provide data for both IFRS financial reporting and Vietnamese tax and regulatory requirements. Depending on the business model, a multi-GAAP framework or a reconciliation and data-mapping mechanism between IFRS and tax reporting figures may be required.
KTC’S RECOMMENDED THREE-STEP ACTION PLAN
To support a smooth transition, KTC recommends the following three-step implementation roadmap for VIFC businesses planning to adopt IFRS:
Step 1 – Gap Analysis
Identify material differences between VAS and IFRS arising from the business’s specific transactions and operating model, quantify the financial impact, and identify data gaps that need to be addressed.
Step 2 – Standardize Accounting Policies & Systems
Develop an IFRS Accounting Manual, establish an IFRS-VAS reconciliation mechanism, and enhance the capabilities of the accounting and ERP systems to support IFRS reporting requirements.
Step 3 – Transition & Dry-Run
Determine the transition date and prepare the opening Statement of Financial Position in accordance with IFRS 1. For businesses adopting IFRS from 2027 and presenting 2026 comparative figures, the required data preparation and transition adjustments should be carried out during 2026.
Businesses should also conduct a dry-run of the closing process and IFRS financial statement preparation to identify and manage data and system risks before formal adoption.
KTC PERSPECTIVE
Applying IFRS at VIFC is not simply an accounting technical exercise. It represents a strategic shift in how businesses measure performance, manage risk and communicate financial information with international investors and financial institutions operating within VIFC.
For businesses planning to adopt IFRS from 2027, the time to prepare is not 2027, but now – in 2026.
Early preparation across accounting policies, data, systems and people will help businesses reduce transition risks and establish a stronger foundation for transparent and consistent financial reporting within VIFC’s international financial environment.
For further professional advice:
Ms. Thái Thị Vân Anh
Email: van.anh.thai@ktcvietnam.com
Tel: (+84) 974 589 163
Mr. Nguyễn Trọng Khiêm
Email: khiem.trong.nguyen@ktcvietnam.com
Tel: (+84) 904 821 889
