The (un)suitability of fair-value accounting in emerging economies: the case of Vietnam

Abstract

Purpose -This study explores the suitability and challenges of implementing fair value accounting (FVA) in Vietnam, an emerging/transitioning economy. While such implementation would enable convergence with International Financial Reporting Standards (IFRS), standard setters and auditors have raised practical concerns about its adoption.Design/methodology/approach -This qualitative study utilizes semi-structured interviews with regulators and auditors, together with an analysis of two fraud cases that illustrate the business environment in Vietnam. Public, private, and capture theories guide the analysis.Findings -The business and institutional environment in Vietnam creates several impediments to FVA being effectively implemented and transparently applied. Given the major challenges identified regarding the infrastructure necessary for this valuation system, the premature adoption of FVA may become a catalyst for corporate misconduct.Research limitations/implications -The findings are derived from data aggregated from two fraud cases and interviews and, as such, the results may not be generalizable to other settings. However, these findings may inform future research, particularly after the Ministry of Finance provides further guidance on the use of FVA in Vietnam.Practical implications -A timely and critical examination of the challenges of implementing FVA in a transitioning economy is provided, and the two fraud cases reveal the complexities of the business environment in Vietnam.Originality/value -This research gives voice to the tensions that developing countries are confronting as they seek to balance external pressures with internal constraints. The introduction of an assemblage of three theoretical lenses enables insights into contemporary issues associated with applying FVA in such settings.

Intertwined institutionalization: pressures on Vietnam’s accounting profession during transition to IFRS

“…The responses highlight the ability of accountants to navigate the system and the auditors who similarly understand the questionable accounting activities potentially being undertaken. Nguyen (2019aNguyen ( , 2019b suggests that accountants might respond differently during the transition and then when IFRS is fully adopted into practice. With this research conducted during the transition phase, there are questions over the institutional environment in place at the time, with evident decoupling activities a concern.…”

“…Efforts to fight corruption have continued to increase, with accounting playing a leading role in government initiatives to improve transparency, public integrity and accountability (Johnston, 2015;Rand and Tarp, 2012;Paterson et al, 2019). The adoption of principlebased International Financial Reporting Standards (IFRS) arguably helps to improve transparency, public integrity and accountability but is not without issues (Nguyen, 2019a;Albu et al, 2014). The Vietnamese accounting system is characterized by more rigidity and reliance on statutory control, more conservatism and lower transparency.…”

Fair Value Accounting and Implications for the Auditing Profession: Historical Overview

“…This combines with the lack of a specific guideline and sufficient legislation related to measuring and auditing such complex estimates. In addition to the lack of active markets, the lack of skilled and knowledgeable preparers and auditors and the weakness or non-existence of corporate governance mechanisms are the situations in most countries (Nguyen, 2019). This situation has also resulted in the biggest auditing failure in world economic history which led to considerable reforms to overcome the severe effect of the crisis with relation to the application of FVA.…”

Ten years ofJournal of Accounting in Emerging Economies: a review and bibliometric analysis

“…Similarly, accounting scholars have been reassessing and extending theories to examine the emerging market institutional and cultural context, including relationships between patronage, corruption and accounting in wealth redistribution in the patronage-based sociopolitical and economic context on accounting practices (including management accounting systems) and their implications for accounting standard-setting and global accounting convergence (Bakre et al , 2017; Borker, 2012; Eltweri et al. , 2018; Frey and Chandler, 2007; Nguyen, 2019; Phan et al. , 2016; Helden and Uddin, 2016).…”

“…Typically, institutional features such as inefficient markets, active government (state) involvement in business, extensive relationship-based business and high uncertainty challenge business models' efficacy and theories from the extant management literature (Xu and Meyer, 2013). Similarly, accounting scholars have been reassessing and extending theories to examine the emerging market institutional and cultural context, including relationships between patronage, corruption and accounting in wealth redistribution in the patronage-based sociopolitical and economic context on accounting practices (including management accounting systems) and their implications for accounting standard-setting and global accounting convergence (Bakre et al, 2017;Borker, 2012;Eltweri et al, 2018;Frey and Chandler, 2007;Nguyen, 2019;Phan et al, 2016;Helden and Uddin, 2016). Many scholars believe that the untapped regional markets in China and India, as well as the persistent roles of the government and state-owned enterprises, and the entry and proliferation of multinational corporations from the emerging economy in developed countries indicate that business (including accounting) research merits closer attention (Fligstein and Zhang, 2011;Fuad et al, 2019;Lin, 2011;Xu and Meyer, 2013).…”