IFRS adoption roadmap raises challenges to property businesses

The recent Ministry of Finance (MoF) ruling to adopt IFRS will send ripples across real estate businesses, especially those with extensive asset portfolios.

Decision No.345/QD-BTC establishes revised compliance requirements for specific groups of enterprises but allows flexibility on adoption timelines and how IFRS is approached. The new reporting standards will become mandatory for almost all businesses after 2025.

The broad thrust of IFRS is that financially reported asset values and liabilities should align with their actual or estimated fair market prices. The most accurate approach is using fair value (FV) accounting, or "mark-to-market", a generally accepted accounting principle. Generally, when any asset or liability value increases or is expected to, the value or liability is adjusted to its current market.

Troy Griffiths, deputy managing director of Savills Vietnam said that this requires the close attention of business leaders and CFOs as assets and liabilities will require accurate and up-to-date valuations and extensive changes to financial statement applications.

“Hard value is great for investors and shareholders wanting an accurate gauge of corporate financial health but involves experience and expertise that CFOs generally lack,” said Griffiths.

ifrs adoption roadmap raises challenges to property firms
Troy Griffiths, deputy managing director at Savills Vietnam, said that IFRS requires close attention of business leaders and CFOs as assets and liabilities will require accurate and up-to-date valuations and extensive changes to financial statement applications

For example, IFRS 16 will no longer differentiate between finance and operating leases. For any contracts that meet the definition of a lease, a lessee balance sheet will show an asset right-of-use with a lease liability.

For lessees owning property rights or benefiting from large "right-of-use" asset portfolios, the change in value will significantly affect their financial position. For occupiers with portfolios of leased properties such as retailers, hoteliers or cinema operators, the additional assets and liabilities on balance sheets will be significant.

At commencement, a lessee shall measure the lease liability present value by unpaid lease payments on that date. Lease payments are discounted referencing the interest rate implicit in the lease if that rate can be readily determined. If not, the lessee uses the lessee’s incremental borrowing rate. The interest rate implicit in the lease affects the lease payments' present value. The unguaranteed residual value comprises the underlying asset fair value and any initial direct costs of the lessor.

Meanwhile, Nguyen Hong Son, head of Savills advisory services, commented that companies required to prepare financial statements for external reporting face potentially serious issues.

 

“Failure to file or comply with FV standards could lead to fines or more serious consequences. Due to more complex reporting standards and the downside potential in getting it wrong, most are turning to reputable valuation firms,” Son said.

He added that registered valuers are a key part of the process to assess the "right of use". Experienced, objective, and reputable valuation companies are required.

Early IFRS adopting enterprises have grasped how FV affects operations and are already reducing implementation costs and compliance risks. At Savills, our advice is to get ahead of this now, rather than put it off until it becomes urgent,” Son added.

ifrs adoption roadmap raises challenges to property firms
Companies require to prepare financial statements for external reporting, face potentially serious issues, according to Nguyen Hong Son, head of Savills Advisory Services

Businesses engaging reputable and experienced consultancies will see a smooth, effective transition and all stakeholders fully comprehending the new IFRS normal. However, early action is required to avoid the inevitable last-minute rush to compliance in 2025.

From 2018-2020 the IFRS adoption roadmap describes 10 to 20 simple standards for implementation which have been required for listed companies since early 2020. An entity shall apply IFRS 16 for annual reporting beginning on or after January 1, 2019. Earlier application is permitted for entities applying IFRS 15 covering Customer Contract Revenues.

Within the context of COVID-19, business leaders need to be closely involved in IFRS conversion as it affects every part of their business. Successful implementation involves the time needed for appropriate assessment and decision-making to avoid cheaper, less thorough, and ultimately more expensive solutions. VIR

Bich Ngoc

 
 

Other News

.
Hanoi wants to tax abandoned villas
Hanoi wants to tax abandoned villas
BUSINESSicon  04/06/2021 

Hanoi has proposed to the Ministry of Finance the imposition of a tax or fine on owners of half-finished and abandoned townhouses and villas which were causing considerable waste of land resources.

VN may have to reduce renewable power in the next five years: energy institute
VN may have to reduce renewable power in the next five years: energy institute
BUSINESSicon  04/06/2021 

It is likely that Vietnam will have to reduce renewable energy sources in the next five years, as booming development in recent years was weighing on the power system, according to a recent report by the Institute of Energy.

Vietnam Airlines to sell 11 aircraft
Vietnam Airlines to sell 11 aircraft
BUSINESSicon  04/06/2021 

The national flag carrier Vietnam Airlines has announced the plan to sell 11 A321ceo aircraft made in 2004, 2007 and 2008.

IPs set up, but Vietnam still needs to do more to attract investors
IPs set up, but Vietnam still needs to do more to attract investors
BUSINESSicon  03/06/2021 

There were positive developments of industrial parks in Vietnam in the first five months of the year, but experts still say the country should do more to attract big investors.

CPI growth in Jan-May lowest in five years
CPI growth in Jan-May lowest in five years
BUSINESSicon  03/06/2021 

The country’s consumer price index (CPI) in the first five months of the year grew 1.29% year-on-year, the lowest for the period since 2016, according to the General Statistics Office.

Ministry of Finance proposes keeping fee reductions until end of 2021
Ministry of Finance proposes keeping fee reductions until end of 2021
BUSINESSicon  03/06/2021 

The Ministry of Finance has proposed extending the reduction periods of several fees beyond the current expiration date of June 30.

Nearly 60,000 businesses withdraw from market
Nearly 60,000 businesses withdraw from market
BUSINESSicon  03/06/2021 

The number of newly established enterprises is still increasing, but the rate of businesses withdrawing from the market has also risen.

LG pulls out of smartphone production in Vietnam from today
LG pulls out of smartphone production in Vietnam from today
BUSINESSicon  02/06/2021 

Today, June 1, is the last day that South Korean conglomerate LG produces smartphones in Vietnam before it focuses on making home appliances only.

VIETNAM BUSINESS NEWS JUNE 3
VIETNAM BUSINESS NEWS JUNE 3
BUSINESSicon  03/06/2021 

 Stock market hits historic peaks

Investment into local start-ups expected to rise this year
Investment into local start-ups expected to rise this year
BUSINESSicon  01/06/2021 

The investment capital into Vietnamese start-ups this year would see a breakthrough despite a year-on-year decrease of 48 per cent in 2020 to reach US$451 million.

Businesses seek sources to buy vaccines for their workers
Businesses seek sources to buy vaccines for their workers
FEATUREicon  02/06/2021 

The electronics, textile and garment, footwear, wooden furniture and dairy sectors have proposed that the Government allow them to seek vaccine sources and pay for vaccinations at their enterprises so they can maintain production.

Vaccines yet to come, but biotech share prices escalate
Vaccines yet to come, but biotech share prices escalate
BUSINESSicon  02/06/2021 

Biotech shares, especially the shares of vaccine producers, are being sought by investors.

Selling farm produce online: e-commerce sites compete to attract farmers
Selling farm produce online: e-commerce sites compete to attract farmers
BUSINESSicon  02/06/2021 

For years, farmers had to rely on the wholesale distribution method and could not sell products directly to consumers. But that has changed in recent years.

Money flows strongly into Vietnam’s stock market
Money flows strongly into Vietnam’s stock market
BUSINESSicon  02/06/2021 

The flow of money from several hundred thousand newly-opened accounts into the stock market has expanded the pockets of Vietnamese billionaires by hundreds of millions of US dollars in a short time.

Difficulties facing the country eased by corporate social responsibility activities
Difficulties facing the country eased by corporate social responsibility activities
FEATUREicon  03/06/2021 

After the Covid-19 vaccine fund was established, Vietnamese businesses contributed hundreds of billions of Vietnamese dong. Many companies said they are willing to vaccinate their employees and customers with their own sources.

New master plan for seaports needed to further boost economic development
New master plan for seaports needed to further boost economic development
BUSINESSicon  01/06/2021 

A new master plan for seaports is needed to further boost the country’s socio-economic development in the rapid international integration process, experts have said.

Realty tax needs revamp to ensure fairness
Realty tax needs revamp to ensure fairness
BUSINESSicon  31/05/2021 

Realty tax not only creates sources of collection for the State budget but also is a policy able to spur growth and reduce bribery related to land. Vietnam does have realty tax.

Many companies manufacture components for Samsung, Foxconn resume operations
Many companies manufacture components for Samsung, Foxconn resume operations
BUSINESSicon  01/06/2021 

The Management Board of Industrial Parks of Bac Giang Province has allowed nine enterprises in Van Trung, Dinh Tram and Quang Chau industrial parks in Viet Yen district, Vietnam’s largest epidemic hotspot, to resume operations.

VIETNAM BUSINESS NEWS JUNE 1
VIETNAM BUSINESS NEWS JUNE 1
BUSINESSicon  01/06/2021 

Shares gain on buoyant banking stocks

Market will continue to breach new highs, but investors should be more cautious: experts
Market will continue to breach new highs, but investors should be more cautious: experts
BUSINESSicon  31/05/2021 

The market witnessed strong buying interest last week and analysts from many securities firms expect indices to continue to hit new highs, but have warned investors to be cautious.

 
 
 
Leave your comment on an article

OR QUICK LOGIN