In comparison with IPSAS standards, the current Vietnamese government accounting regime prescribed under Decision No.19/2006 of Ministry of Finance has differences as following.
In respect of scope, the current government accounting regime does not regulate to state entrepreneurs although they are supported with investment capital or subsidies regularly by the government. The IPSAS prescribe clearly the application to public sector corporations which are reliant on continuing government funding, though they have more than 50% of their revenues from market activities.
In terms of the basis of accounting, the Vietnamese government accounting applies either the modified cash-based accounting or the modified accrual-based accounting depending on kinds of agencies and units. IPSAS give separately two bases of cash and accrual accounting.
Governments can only choose one of those bases together with modifications suitable with their conditions.
In terms of the consolidated government financial statement, the Vietnamese government accounting does not have the consolidated financial report, but only has summarized reports of budget and budget settlement from lower agencies and levels of government, and ones of revenues and expenses from public services provision, production and business activities.
According to the IPSAS, government has to make two statements including the consolidated
financial statement of controlled entities by government and the statement of budget settlement of levels of government.
In terms of quantity of statements, as list of financial and budget settlement statements mentioned abovein part a of 3.1.4, each lowest government agency in Vietnam has to make many financial and budget statements including eight reports and two tables, but not the statement of cash flows and the statement of changes in net assets/equity. IPSAS require one the statement of cash flows on the cash-based accounting, and five the financial statements on the accrual-based accounting included the statement of cash flows.
In terms of purpose, the Vietnamese government accounting regime does not regulate information users. Financial statements recommended by IPSAS are general purpose financial statements which mean they provide a wide range of users with information useful for decision making and demonstrate accountability of the entity for resources entrusted to it.
Besides general differences, the current government accounting regime has specific differences in content, form of financial statements compared to the IPSAS.
Some particular differences in statements
For pure administrative and public service provision-based agencies funded fully by state budget, because of implementing modified cash-based accounting, surplus and deficits are calculated based on revenues/expenditures, but not on revenues/expenses. In other words, revenues/expenditures are directly recorded to increase/decrease the equity, while IPSAS demand to recognize the increase/decrease of equity when revenues are higher/lower than expenses in the income sheet causing either a surplus/deficit.
According to IPSAS standards, agencies are economic units and they have to define surplus/deficit which is the difference between revenues (included in allocated state budget) and expenses. However, in Vietnam, pure administrative agencies are not seen as economic units. They have to comply with regulations of the Law on State budget that they are financed fully by state budget from the beginning of a financial year, and are not permitted to spend over the amount that has been allocated in the sate budget, thus at the end of period there should not be surplus or deficit.
The Vietnamese government accounting regime requires that depending on kinds of revenues and expenses, they are showed in two different types of statements, namely the summary of budget settlement (Form B02-H) applied to revenues and expenditures from state budget, and the statement of revenues, expenses from public services provision, production and business activities (Form B03-H), while IPSAS regulate all revenues and expenses are recorded in one the financial statement – the statement of financial performance. Besides, the IPSAS-Board issued separately IPSAS No. 24 “Presentation of budget information in financial statements”.
The standard applies to public sector entities that make their approved budget(s) publicly available. It requires such entities to make certain disclosures about budget and actual amounts in their financial statements or other reports. It does not require that public sector entities make publicly available their approved budgets, nor does it specify requirements for the formulation or presentation of approved budgets that are made publicly available. This standard requires that financial statements include a comparison of actual amounts with amounts in the original and final budget, an explanation of material differences between budget and actual amounts, and a reconciliation of actual amounts on a budget basis, with actual amounts presented in the financial statements when the accounting and budget basis differ.
Unlike IPSAS, the current government accounting does not have the statement of financial performance which presents comprehensively diverse types of activities covering pure administration, providing services but not having revenues, providing services but having revenues and being subsidized by state budget, and business activities having profit. Some expenses of fixed assets, inventories, and uncompleted capital construction are recognized in the period as soon as buying takes place and these expenses are not matched with revenues recorded.
Unlike IPSAS, the balance sheet of accounts prescribed according to the current government accounting regime does not illustrate types of assets and liabilities in order, and net assets/equity, but demonstrates accounts. Hence, it does not reflect an agency, s financial position.
Besides, financial reports only reflect some elements and accounts of an accrual-based accounting, while IPSAS guideline financial statement reporting on a full accrual basis of accounting.