How does Circular No. 118/2026/TT-BTC regulate the application of International Accounting Standards in Vietnam? Which enterprises may choose to apply these Standards, and what principles must they follow?
1. How does Circular No. 118/2026/TT-BTC regulate the application of International Accounting Standards in Vietnam?
Under Articles 1, 2, and 3 of Circular No. 118/2026/TT-BTC, enterprises and economic organizations that are members of the International Financial Center in Vietnam may choose to apply International Accounting Standards, provided that they have the need, capacity, and resources to do so, in preparing and presenting financial statements and consolidated financial statements.
Specifically, Article 3 of Circular No. 118/2026/TT-BTC prescribes three principles for the application of International Accounting Standards:
International Accounting Standards in force shall be applied in their original form and without modification.
International Accounting Standards shall be applied consistently throughout the financial year in preparing financial statements and consolidated financial statements. The commencement or cessation of their application may take effect only on the first day of the subsequent annual accounting period.
Financial statements and consolidated financial statements shall ensure the full, timely, faithful, and transparent presentation of information and facilitate examination and control.
Accordingly, the Circular does not require all enterprises in Vietnam to apply International Accounting Standards.
Enterprises and organizations will consider registering to apply International Accounting Standards in Vietnam depending on their size, direction, and needs.
If they choose to apply International Accounting Standards, enterprises and economic organizations shall apply the Standards in force in their original form and without modification, and shall apply them consistently throughout the financial year.
2. When may enterprises change their application of International Accounting Standards?
Under Clause 2, Article 3 of Circular No. 118/2026/TT-BTC, enterprises shall apply International Accounting Standards consistently throughout the financial year.
Enterprises and economic organizations may not commence or cease applying the Standards at their discretion during a financial year. The commencement or cessation of their application may take effect only on the first day of the subsequent annual accounting period.
In addition to this timing requirement, Clause 4, Article 5 of Circular No. 118/2026/TT-BTC requires enterprises and economic organizations to notify the Ministry of Finance in writing within the 30-day period preceding the date on which they commence or cease applying International Accounting Standards.
3. To which agencies must financial statements prepared in accordance with International Accounting Standards be submitted?
Under Article 4 of Circular No. 118/2026/TT-BTC, enterprises and economic organizations shall prepare and submit financial statements and consolidated financial statements to:
The Executive Body;
The Supervisory Body;
Competent agencies of Vietnam.
Reporting periods and submission deadlines shall comply with Vietnam's accounting law, rather than being determined by enterprises under a separate mechanism.
Clause 3, Article 4 also provides that financial statements and consolidated financial statements prepared in accordance with International Accounting Standards shall be used for submission to functional agencies and for public disclosure as prescribed by law.
Accordingly, even when financial statements are prepared in accordance with International Accounting Standards, enterprises shall still comply with the applicable requirements concerning recipients, reporting periods, submission deadlines, and public disclosure.
4. What are the responsibilities of enterprises applying International Accounting Standards?
Article 5 of Circular No. 118/2026/TT-BTC specifically prescribes the responsibilities of enterprises and economic organizations choosing to apply International Accounting Standards.
Accordingly, enterprises and economic organizations shall:
Take legal responsibility for their choice to apply International Accounting Standards in preparing and presenting financial statements and consolidated financial statements;
Provide sufficient information and clear and transparent explanations to tax offices, administration and supervision agencies;
Declare their compliance with International Accounting Standards in the Notes to the financial statements and consolidated financial statements;
Notify the Ministry of Finance in writing within the 30-day period preceding the date on which they commence or cease applying International Accounting Standards.
In particular, the declaration of compliance shall be included in the Notes to the financial statements and consolidated financial statements. This is a specific obligation arising from an enterprise’s choice to apply this system of standards.
5. What should enterprises note when applying International Accounting Standards for the first time?
Under Clause 1, Article 6 of Circular No. 118/2026/TT-BTC, enterprises and economic organizations changing from their current accounting regimes or accounting standard systems to International Accounting Standards shall present comparative information and provide sufficient explanations of the information in their financial statements in accordance with International Financial Reporting Standard (IFRS) 1 – First-time Adoption of International Financial Reporting Standards.
6. When does Circular No. 118/2026/TT-BTC take effect?
Under Clause 1, Article 7 of Circular No. 118/2026/TT-BTC, the Circular takes effect on January 1, 2027, and applies to financial years beginning on or after January 1, 2027.
In addition, the Ministry of Finance, specifically the Department of Accounting and Audit Management and Supervision, is responsible for regularly updating and publishing on the Ministry of Finance’s portal the list of enterprises and economic organizations choosing to apply International Accounting Standards.
Within 15 days of receiving an enterprise’s or economic organization’s written notice of the commencement or cessation of its application of the Standards, the Ministry of Finance will update the publicly posted list accordingly.
The foregoing provides information on “How does Circular No. 118/2026/TT-BTC regulate the application of International Accounting Standards in Vietnam?” Please refer to Circular No. 118/2026/TT-BTC on LuatVietnam.vn for details and related features, such as validity status and the document relationship diagram.
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