PhD. thesis: Completing the Financial instruments accounting for non-financial firms in Vietnam

Research objectives: Identify the degree of presentation and disclosure of information of financial instruments of non-financial firms in Vietnam (based on the survey data from companies listed on Ho Chi Minh City Stock Exchange in 2010 -2012) Testify the link between the degree of presentation and disclosing information of financial instruments and the characteristics of the firms by formulating a model using data in 2010, 2011, and 2012.
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PhD. thesis: Completing the Financial instruments accounting for non-financial firms in Vietnam 1 CHAPTER 1 INTRODUCTION OF THE STUDY ON FINANCIAL INSTRUMENTS ACCOUNTING FOR NON-FINANCIAL FIRMS IN VIETNAM1.1 Necessities Vietnam is integrating more intensively and extensively into the globaleconomy, demonstrated by the vigorous flows of capital, technology and products inand out of the country. Numerous foreign companies are investing in Vietnamesemarket; they formulate financial reports in accordance to international standards. Onthe other hand, Vietnamese companies are promoting export and establishing theirbusiness overseas; thus, they are put under a tighter supervision and must comply withinternational standards in formulating financial reports.According to the international accounting standards, financial instruments accounting(FIA) must comply with requirements of IAS32 on the “presentation of financialinstrument”; IAS39 on the “recognition and measurement of financial instruments”and IFRS7 on the “disclosure of financial instrument information”.Vietnam has not yet succeeded in formulating a systematic standard for FIA. Instead,the regulations on the practice of FIA are scattered in several set of standards such asVAS01, VAS10, VAS16, etc. This situation are causing several difficulties in managingand standardizing the information, as well as in implementing accounting practices ina financial market with the operation of derivatives such as forwards, futures, swaps,options. Meanwhile, the corporate accounting for non-financial firms does not addressFIA, resulting in the confusion and inconsistence in the reporting of firms’ financialsituation, affecting the trustworthiness and comparativeness of the indexes in thefinancial reports.Based on the actual demand of businesses, investors’ requirement for informationdisclosure and the needs of the accounting profession in the context of integration, theauthor choose to work on the topic “Completing the Financial instrumentsaccounting for non-financial firms in Vietnam” for the PhD. thesis.1.2 Overview of research context 1.2.1 International research on FIA 1.2.1.1 Identification of financial instruments Most of the studies agree on the main features of a financial instrument, which 2is a contract binding parties; the instrument implies both right (assets) and obligation(liabilities) in accordance with the contract; depending on the contract, the paymentinstrument can be exchanged directly or indirectly. 1.2.1.2 Measurement of financial instruments The scientific circle highlights the advantage of the fair value accounting,which still remains a new concept to Vietnamese accounting, particularly FIA. Thismotivates the author to study the fair value accounting to find a solution in order tocomplete the FIA for non-financial firms in Vietnam. 1.2.1.3 Recognition of financial instruments The recognition of financial instruments depends on the classification of theinstruments. L.EC.Wilson & Bryan (1997) asserts that it is necessary to formulateaccounting principles on financial instruments based on their purposes rather thanimposing each instrument with specific principles, so that new instruments can beemployed to ensure the usefulness of information and, at the same time, minimize thecost of establishing new principles. 1.2.1.3 Presentation of financial instrument Financial instruments are becoming more and more complicated sinceinstruments are hybridized, for example: convertible bond, preferred dividend(possessing the characteristics of both liabilities and equity); new types of derivatives(hybridizing the derivatives), hybrid instrument with embedded derivatives, etc.Hence, the recognition of financial instruments becomes more difficult accordingly. 1.2.1.4 Information disclosure of financial instruments Financial instruments are becoming more and more diversifying andcomplicated; thus, the requirement for disclosure of information is also getting harsh.Caedo and Tirado (2004) stated that the information on the risks that the firm confrontsmay affect business’ future profit, and thus, it is necessary to disclose this informationto users of the financial reports. 1.2.2 Status-quo of research on accounting financial instruments in non-financial firms in Vietnam There are quite a few scientific researches in Viet Nam focusing on theapplication of international accounting standards on FIA for Vietnamese firms,especially banks. Nevertheless, none of them comprehensively address the generalprinciples of FIA from identification, measurement, recognition, presentation todisclosure of information of financial instruments. Particularly, none of these researchevaluate the degree to which financial instruments are presented and disclosed on 3firm’s financial reports, and figure out the link between this degree and specificcharacteristics of the firm.1.3 Research objectives The overall objective of this thesis is to complete the practice of FIA for non-financial firms in Vietnam. In order to attain that objective, this thesis outlines thespecific objectives as follows: Complete the identification, classification of basic financial instruments andderivatives; Complete the practice of recognizing basic financial instruments andderivatives;Complete the presentation and disclosure of information on basic financial instrumentsand derivatives; Identify the degree of presentation and disclosure of information of financialinstruments of non-financial firms in Vietnam (based on the survey data fromcompanies listed on Ho Chi Minh City Stock Exchange in 2010 -2012) Testify the link ...