Tài liệu Impact of globalization on international accouting harmonization a case of vietnam

IMPACT OF GLOBALIZATION ON INTERNATIONAL ACCOUTING HARMONIZATION: A CASE OF VIETNAM BY NGUYEN THI PHUONG THAO Graduation Project Submitted to the Department of Business Studies Help University College, in Partial Fulfillment of Requirements for The Degree of Bachelor of Business (Accounting) Hons JUNE 2010 ACKNOWLEDGEMENT First and foremost, my sincere gratitude is dedicated to my supervisor – Dr. Le Van Lien. Thanks for your strong support, guidance, intuitive comments, and also motivation through the process of completing this thesis. In addition, I would like to send my gratitude to the International School and HELP University College for giving me an opportunity to conduct my study in my favorite area. Furthermore, I also address my appreciation to Mr. Nguyen Xuan Thuy (Vice chief Executive of Bao Viet finance- insurance Groups) and Ms. Ho Thi Thu Phuong (Academic Administrator of British University Vietnam) who supported my thesis with enormous information in data collection process. My thankfulness is also addressed to others who have helped me since the beginning of my study until I can finish my thesis. Finally, thanks you to all my family and friends, for your support, help, and motivation and made it possible for me to complete this study. Hanoi, June 2010 Nguyen Thi Phuong Thao IMPACT OF GLOBALIZATION ON INTERNATIONAL ACCOUTING HARMONIZATION: A CASE OF VIETNAM BY NGUYEN THI PHUONG THAO JUNE 2010 Supervisor: Dr. Le Van Lien ABSTRACT This study provides the framework for understanding the concept of accounting harmonization. Some of key elements relating to this concept such as: the importance of accounting harmonization in global economy, the actor of issuance IAS, the advantages and disadvantages of accounting harmonization, the different levels of accounting harmonization are clarified. This study also tries to evaluate the infrastructure of accounting system in Vietnam response to international accounting. First of this action, the researcher evaluate the role of MOF in its efforts for making harmonization process. This is shown by establishment of Vietnamese accounting standards. Secondly, the researcher tries to compare some typical Vietnamese Accounting Standards and International Accounting Standards. The purpose of comparison is to evaluate the adoption of international accounting into Vietnamese accounting environment. Furthermore, the researcher desires to examine the awareness of Vietnamese accountants (including different levels) toward accounting harmonization. This research tries to evaluate how their attitudes, their behaviors, and their needs relating to accounting harmonization. Finally, this study tries to evaluate actual applications and accounting treatments in some companies (different types and sizes of companies) in accordance with accounting harmonization. This is because once we understand and evaluate the actual picture of accounting harmonization process in Vietnam, we can learn from the experience. This is helpful for future research or strategic plans. From the results obtained through questionnaires, the term of accounting harmonization is not new in Vietnam, and Vietnam is completing its harmonization process step by step. However, awareness of Vietnamese about this term is different from each other, and the differences between actual applications in some companies. Thus, several recommendations and scopes for future research might be developed by the researcher. However, because of limitation, this study only covers some typical items of this topic. TABLE OF CONTENT Page Declaration of Originality and Word Count ii Acknowledgment iii Abstract iv Table of content vi List of tables ix List of Abbreviations xi CHAPTER 1 INTRODUCTION 1.1 Background of the study 1 1.2 Research objectives 2 1.3 Problem statement 4 1.4 Limitation of the study 5 1.5 Organization of the research 6 References 7 CHAPTER 2 LITERATURE REVIEW 2.1 The importance of accounting harmonization 8 2.1.1 The need for accounting harmonization 8 2.1.2 Distinguish between accounting harmonization and accounting standardization 9 2.2 The actor of issuance IAS 10 2.3 Advantages of accounting harmonization 11 2.4 Disadvantages of accounting harmonization 13 2.5 Different levels of accounting harmonization 14 2.5.1 International level of accounting harmonization 14 2.5.2 Regional level of accounting harmonization 15 2.5.3 National level of accounting harmonization 17 2.5.3.1 Some countries in ASEAN 17 2.5.3.2 Vietnam 19 References CHAPTER 3 21 RESEARCH METHODOLOGY 3.1 Research objectives 27 3.2 Research Methodology 28 3.2.1 Primary data 28 3.2.2 Secondary data 29 3.3 Research Instrument 30 3.3.1 Awareness of Vietnamese accountants of accounting harmonization 31 3.3.2 How companies in Vietnam response to accounting harmonization 31 3.4 Research Hypotheses 32 3.5 Data Collection 33 3.6 Sampling 34 3.6.1 Firms 34 3.6.2 Accountants 34 3.7 Response Rate 34 3.8 Interpretation of Data 35 3.9 Limitation of Research 35 References 36 CHAPTER 4 ANALYSIS OF DATA 4.1 Vietnamese accounting standards (VAS) responding 4.1.1 General overview 37 37 4.1.2 The actors 38 4.1.3 Evaluation the role of MOF in process of establishment VAS 38 4.1.4 Vietnamese accounting standards 39 4.2 Comparison between some typical VAS and IAS 41 4.2.1 VAS 02 and IAS 02 41 4.2.2 VAS 24 and IAS 07 42 4.2.3 VAS 25 and IAS 27 42 4.3 Analysis of primary data 43 4.3.1 Classification of the respondents of different job levels 43 4.3.2 Classification of the Respondents from Types of Companies 44 4.3.3 Test hypotheses 45 4.4.3.1 Awareness of Vietnamese Accountants 45 4.4.3.2 Practice of accounting treatments in some companies in Vietnam responding to accounting harmonization 54 References 64 CHAPTER 5 CONCLUSION 5.1 Comparison between IAS and VAS 66 5.2 Awareness of Vietnamese accountants relating to accounting harmonization 67 5.3 Accounting treatments in some companies in Vietnam 68 5.4 Recommendation 70 5.5 Scope for future research 71 BIBILIOGRAPHY 73 APPENDICES 81 LIST OF TABLES Tables Title Page Table 4-1 Four VAS issued and promulgated in 2001 and relating IAS 39 Table 4-2 Six VAS issued and promulgated in 2002 and relating IAS 39 Table 4-3 Six VAS issued and promulgated in 2003 and relating IAS 40 Table 4-4 Six VAS issued and promulgated in 2004 and relating IAS 40 Table 4-5 Four VAS issued and promulgated in 2005 and relating IAS 40 Table 4-6 Comparison between VAS 02 and IAS 02 41 Table 4-7 Comparison between VAS 24 and IAS 07 42 Table 4-8 Comparison between VAS 25 and IAS 27 43 Table 4-9 Classification of the respondents of Different job level 44 Table 4-10 Classification of the Respondents from Types of Companies 44 Table 4-11 Hear the term of “accounting harmonization” 46 Table 4-12 Perception of the training program for accountant to improve their knowledge relating to international accounting 47 Table 4-13 Perception of translating financial statements into English 48 Table 4-14 Accounting harmonization is the essential tool to develop in 50 global economy Table 4-15 Accounting harmonization can reduce the gap amongst different accounting systems in each country 51 Table 4-16 Accounting harmonization can take easy ability to adapt than accounting standardization 52 Table 4-17 Accounting harmonization can encourage more global economic activities 53 Table 4-18 Have a person can work with international accounting standards 55 Table 4-19 Preparation cash flow statement per annual 56 Table 4-20 Having financial statements translated into English 57 Table 4-21 Duration companies have applied VAS in preparation financial statements 58 Table 4-22 Preparation financial statements 59 Table 4-23 Application of VAS in accounting system 60 Table 4-24 Recruitment employees can prepare and understand the financial statements in English 62 Table 4-25 Translating financial statements into English 63 LIST OF ABBREVIATIONS Abbreviation Full Name AFA ASC ASEAN Federation of Accountants Accounting Standards Council ASEAN Association of South East Asian nations ASPC Auditing Standards and Practices Council BOA Board of Accountancy EFRAG European Financial Reporting Advisory Group EU European Union FEE Federation des Experts Comptables Europeens IAI Indonesian Institute of Accountants IAS International Accounting Standards IASB International Accounting Standards Board ICAAT Institute of Certified Accountants and Auditors of Thailand ICAEW Institute of Charted Accountants of England and Wales ICPAS Institute of Certified Public Accountants of Singapore IFAC International Federation of Accountants IFRS International Financial Reporting Standard ISAR International Standard of Accounting and Reporting MOF Ministry of Finance OECD Organization for Economic Co-operation and Development PICPA Philippine Institute of Certified Public Accountants VAS Vietnam accounting standards WTO World Trade Organization CHAPTER 1 INTRODUCTION 1.1 BACKGROUND OF THE STUDY In recent time, we often hear the term of “globalization”. This concept is becoming the new trend all over the world. What is globalization? Generally, globalization is the worldwide integration of some typical aspects (economy, technology, politic, culture, and society) across countries to improve the collaboration amongst various countries, and help each other on development (Sara Hamilton, 2009). In other words, globalization leads to the in-depth influence on various aspects of modern society. Often, when we call the term of “globalization”, we often imply the economic globalization. As we known, accounting is the basic tool, as well as the basic language to improve economic developments. Therefore, globalization raise the big question: What is the most difficulty amongst typical accounting systems across countries? Under the effect of globalization, accounting harmonization becomes a big issue in worldwide picture. That’s why, accounting harmonization considered as the main topic on current and heated discussion (Keegan, 1988). Perception on accounting harmonization in rests of the world changes significantly since more and more countries set up their accounting standards. Those standards provide guidelines about application accounting system respond to international accounting standards issued by the International Accounting Standards Board (IASB). For examples: according to Jeffrey (1999) one of the top priorities of Instituto Mexicao de Contadores Publicos (IMCP) of Mexico is to make harmonization with International Accounting Standards (IAS); some other countries such as Australia and countries in the European Union also have elected to adopt the accounting standards issued by the IASB (Craig Deegan, 2009). In South East Asia, some similar situations relating to making accounting harmonization are also concerned. The Association of South East Asian nations (ASEAN) play the important role to improve the economy amongst the countries of South East Asia. This organization makes significant efforts for accounting harmonization through ASEAN countries. This purpose is expressed through Federation of Accountants (AFA). ASEAN tries to provide the guidelines and techniques to its members’ professional accounting bodies about application of IAS effectively. As compared to other countries, Vietnam takes significant steps to respond the impact of globalization on accounting harmonization. Through this study, the researcher attempts to provide the detailed information relating to accounting harmonization in global economy and how Vietnam to respond this issue. 1.2 RESEARCH OBJECTIVES This study is developed to explore the impact of how Vietnam response to accounting harmonization in global economy. Accordingly, there are several objectives discussed in this study: First of all, the main objective is to provide all necessary information relating to the accounting harmonization. The question: “Why do we need to make accounting harmonization in global economy?” will be discussed. According to this study, the researcher provides the general introduction of IASB and the role of IASB in making accounting harmonization process of issuance IAS. Some advantages and disadvantages of various countries of application IAS in international accounting environment are also mentioned. In order to help readers understand about the topic, accounting harmonization will be divided in to three levels including international level, regional level, and national level (gupea.ub.gu.se). The first level (international level) will support for the overview of accounting harmonization from the world’s perspective. The next level (regional level) will provide some detailed information relating to methods that typical regions response to accounting harmonization. At the last level (national level), we discuss some significant efforts of each country to reach the accounting harmonization. The second objective is to clarify impact of “reform process” in 1986 on accounting environment in Vietnam. That year is considered as the important point of economic development in Vietnam. Vietnam carried out a reform process of changing its centrally planned economy to a socialist market-oriented economy, liberalizing the domestic economy and integrating with outside the world (dissertations.ub.rug.nl). The “reform process” also encourages the initial step to establish Vietnamese Accounting Standards (VAS) in accordance with accounting harmonization. In addition, VAS and process of issuance of VAS are discussed. Moreover, the researcher tries to compare some typical IAS and VAS. The third objective is obtained from the view of accountants in finance and accounting department of some companies in Vietnam. The researcher tried to design ten questions to explore their awareness about international accounting, and making Vietnam accounting policy harmonization with international accounting. Furthermore, by conducting the research, the researcher intends to discuss more factors causing impacts on application international accounting in Vietnam in practice rather than collecting from the available sources. Some research hypotheses are also will be developed and tested through the process of conducting research using chi-square test. The researcher tries to provide the completed view about the application international accounting in Vietnam through Vietnamese accountants’ awareness, and response of some companies in Vietnam to accounting harmonization. 1.3 PROBLEM STATEMENT Nowadays, since the wave of global economy increases rapidly, this requires to establish a main set of accounting environment for all countries to application referred to IAS/IFRS. This process brings important meaning importance because accounting harmonization is the basic tool reducing the gap across national accounting polices. The main benefit of this process for improvement economic integration activities amongst various countries whether those countries come from the different parts or regions of the world. Moreover, discussion about accounting harmonization has the special meaning for Vietnam, since Vietnam joined World Trade Organization (WTO) on 11 January 2007(wto.org). By joining WTO, Vietnam went to the large ocean; Vietnam accepted the competitive environment and expanding economic activities outside country. Thus, accounting policy in Vietnam needs to be approached with international accounting near by near (news.bbc.co.uk). Within this study, the researcher provides more about understanding the issues of Vietnam toward international accounting through some questions as follows:  Does Vietnam change accounting policy toward international accounting?  Does Vietnam have some significant efforts to make accounting harmonization in global economy?  Is it benefit for Vietnam to reach accounting harmonization?  Does Vietnam set up Vietnam accounting standards in harmonization (VAS) with IAS/IFRS?  What is the process to make accounting harmonization taking place in Vietnam?  Does Vietnam need more necessary conditions in harmonization process? Answering these questions above will help to expand understanding of current accounting policy in Vietnam and its efforts to pursuit accounting harmonization. 1.4 LIMITATION OF THE STUDY This study is limited to discussion on some specific of relating accounting area such as: accounting standards, financial reports, inventories, cash flows and so on. It is hard to cover all items of the issue here because it includes a broad range. Furthermore, the limitations of time also make the researcher not to conduct this study on all aspects relating to issue. Therefore, the researcher needs to select some specific item to clarify and discuss to help the reader understand in the effective way about all the necessary information relating to the topic in general. 1.5 ORGANIZATION OF THE RESEARCH This study will be organized into five chapters. This is because the readers can understand this paper on the logical way. Five chapters referred here as: introduction, literature review, research methodology, analysis, and conclusion. Chapter 1, with the title “Introduction” will mention the general picture about the relating topic. Chapter 2, with the title “Literature review” will provide all necessary information relating to accounting harmonization. Some key factors of accounting harmonization are the importance of accounting harmonization, the role of IASB, advantages and disadvantages of accounting harmonization, and different levels of accounting harmonization. Chapter 3, with the title “Research methodology” will describe the research tools, and data sources in conducting this study like as: primary data, secondary data, and so on. Chapter 4, with the title “Analysis” will analyze all the collected information (from both of secondary and primary data) of how Vietnam responses to accounting harmonization. Chapter 5, with the title “Conclusion” will sum up and evaluate all the results from this study, simultaneously propose some useful suggestions for further studies relating to this similar issue. CHAPTER 2 LITERATURE REVIEW This chapter is developed to provide framework relating to accounting harmonization. The aim of this chapter is to help the readers understand various aspects around this term of international accounting harmonization. Accordingly, the readers can develop their background relating to this topic. 2.1 THE IMPORTANCE OF ACCOUNTING HARMONIZATION Belongs to this section, we approach the justifications of accounting harmonization. In order to help the readers obtain this topic in the effective way, this section will be divided into two subsections. The purpose of doing that is to explain of the need for accounting harmonization. Moreover, the readers can distinguish between accounting harmonization and accounting standardization clearly. 2.1.1 The need for accounting harmonization The global economy developing rapidly leads to significant effects on accounting environment. One of those effects is the barrier amongst different accounting rules in each country when integrating global activities. This is because accounting is considered as the language of business (Ph. Diaconu PAUL). Obviously, if different countries flow the same accounting rules, the gap between accounting system in each country will disappear (Craig Deegan, 2009). This issue leads to the global efforts for establishment a set of accounting standards applied by different countries. Accordingly, international accounting standards will open new horizon of evolution (Anderson, 1993). Those standards will help the different financial information between various companies become more relevant in the purpose of comparative analyses or comparisons. 2.1.2 Distinguish between accounting harmonization and accounting standardization. In recent years, people always talk about international accounting. However, most of them still confuse between accounting standardization and accounting harmonization. Before understanding relating aspects of international accounting harmonization, the readers need to know the basic feature of each concept. The first concept known as accounting standardization referred to a more rigid and narrow set of rules (Nobes and Parker, 2004). The implication under this term is different countries need to follow the unique set of accounting rules, fundamental principles, accounting standards without amendment and making adoption with regulations in each country. The main advantage of using accounting standardization is to use the consistent accounting systems amongst different countries, save time and transfer cost. However, this also causes the main challenge for countries with lower infrastructure of accounting policy than others. The second concept is known as accounting harmonization. This concept includes the similar characteristic with accounting standardization. However, accounting harmonization is more flexible in which allows every country to establish its accounting standards to meet its regulation based on international accounting standards. As far as concern, accounting harmonization has to develop from the base of accounting standardization (Weber, Cameron M., 1992) because we need the framework of accounting standards first, and then different countries make amendment for harmonization with international accounting standards. Based on this fundamental advantage mentioned above, accounting harmonization is preferred by most countries. The actor of issuance of international accounting standards, the advantages and disadvantages of this concept, as well as the different level of accounting harmonization will be discussed later. 2.2 THE ACTOR OF ISSUANCE IAS International Accounting Standards Board (IASB) is considered as the independent setting body of the International Accounting Standards (IAS) (iasb.org). The history of IASB and the idea for accounting harmonization started from fifty years ago by Henry Benson (Veron, 2007). Henry Benson was a former president of the Institute of Charted Accountants of England and Wales (ICAEW). He wanted to see Canadian Institute of Charted Accountants and the American Institute of Certified Public Accountants approach to more intimate basis. He also repeated his implication in his autobiography under the title Accounting for Life in 1989 (Craig Deegan, 2009). More detailed, he identified about his ambition of making the dialogue between three countries (United Kingdom, American, and Canada) to make them closer together because these countries had the significant on accountancy at that time. Craig Deegan mentioned more that three those bodies had established the International Accounting Standards Committee (IASC) in 1973 and then created IASC Foundation. The IASC foundation includes twenty-two trustees in which six are appointed from North America, six from Europe, six from the Asia/Ocean region, and four from any area (www.federalreserve.gov). International Accounting Standards Board was developed in 2001 (en.wikipedia.org). There are fourteen members of IASB, and any IAS need to be approved by at least a two-thirds majority of members (Craig Deegan, 2009). IASB known as an independent standard setting body housed in London (Jacob, RA., & Madu, C.N., 2009). From 1973 to 2000, IAS were issued by the IASC, and also amended by IASB (www.iasplus.com). Some of IASs has replaced with the new International Financial Reporting Standard (IFRS). Until now, more than 100 countries have applied the accounting standards belongs to IASB, event though each country need to conduct significant change in domestic accounting system responding to international accounting standards. 2.3 ADVANTAGES OF ACCOUNTING HARMONIZATION Accounting harmonization causes different advantages in global economy. However, under the limitation of this study, the researcher tries to discuss some main advantages around this concept. Accordingly, the readers can evaluate the usefulness of accounting harmonization in the basic term. According to Securities and Exchange Commission (SEC) in 2008, one of major benefits of application IAS or IFRS is to increase comparability of financial statements. Such comparability can reduce the misunderstanding of foreign financial statements; hence this helps the companies save time and money (Ph. Diaconu PAUL). Besides that, accounting harmonization serves the purpose of raising the