METHODOLOGY AND PROPOSED MODEL

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fixed assets. For biological assets that are eligible to be recognized as fixed assets, they are tracked through three criteria: historical cost, accumulated depreciation and residual value according to tangible fixed asset accounting standards (VAS 03) ). Therefore, studying the international accounting standard No. 41 - Agriculture is necessary to further improve the accounting regulations in the agricultural sector in Vietnam togerther with being in line with international accounting practices...

that this standard assumes that the fair value of agricultural products at the time of harvest can always be reliably determined.

 Government subsidies for agriculture

The second major focus of this standard is how to recognize and measure an unconditional grant associated with a biological asset. Accordingly, a biological asset measured at fair value less costs to sell will be recognized in profit or loss if and only if the allowance becomes a receivable.

In addition, a government grant is tied to conditions relating to a biological asset that are measured at fair value less cost of sale. For example, when a government subsidy that requires a firm not to engage in agricultural activity has been determined, the enterprise will recognize the subsidy in profit or loss if and only if, associated with the subsidy are satisfied. However, the terms and conditions of government grants vary widely. For example, a grant may require a business to cultivate a certain site for 5 years and require the enterprise to repay all subsidies if farming is less than 5 years. In this case the allowance is not recognized in profit or loss until 5 years later.

However, if the term of the grant allows a portion to be retained over time which has expired, the enterprise recognizes that portion in profit or loss when the period expires. If a government subsidy is related to a biological asset measured at cost less accumulated amortization and accumulated loss or damage, then the enterprise applies international accounting standards IAS20 – Accounting for Government Grants and Disclosure of Government Assistance.

 Disclosure in financial statements

This Standard requires an enterprise to disclose the total profit or loss incurred during the current period. It is recognized on initial recognition of biological assets and agricultural products from the change in fair value less cost of sale of the biological asset. The business provides a description of each biological asset class. This disclosure may, upon request, be in the form of a written description or a quantitative description. If information is not disclosed elsewhere when issuing financial statements, an enterprise should describe: the nature of the activity associated with each biological asset class; non-financial measures or quantitative estimates of each class of biological assets at the end of the period; and results of agricultural products for the period.

The enterprise will have to disclose: the existence and carrying value of the biological asset is limited, the use value of the mortgaged biological asset as security for the debt; the value of commitments to develop or acquire biological assets; and Strategy for financial risk management related to agricultural activities. In addition, the enterprise will present a reconciliation of the change in realized value of the biological asset from the beginning to the end of the current period.

The balance sheet includes: Gain or loss arising from change in fair value less selling expenses;

Increase due to purchase; Decreases due to sale and biological assets classified as held for sale (or placed in a liquidation class which is classified as held for sale) in accordance with IFRS5;

Reduced due to harvest; Increase due to business combination; Net exchange differences arising from the conversion of the financial statements into another presentation currency and from the conversion of operations into the reporting currency by the reporting entity; and Other Changes.

Through the published regulations as above, it can be seen that the standard is very interested in the issue of changing the fair value of agricultural assets. Any related increase or decrease must be

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reported in the report. This is completely reasonable because investors are often interested in all the information in the financial statements to make the right investments.

3.2. The application of IAS 41 in agricultural accounting in Vietnam currently

The application of IAS41 in agricultural accounting in Vietnam can be assessed as follows:

Firstly, by the end of 2016, the Ministry of Finance has developed a roadmap to apply IAS/

IFRS to Vietnam, but so far Vietnam has not announced or committed to apply IFRS/IAS, so IAS41 has not been applied in Vietnamese accounting.

Secondly, the fair value accounting model has not been appeared in the Vietnamese accounting system before, the concept of fair value was officially mentioned when the 2015 accounting law was promulgated,.

Third, because the development of enterprises in the agricultural sector in Vietnam is still in the early stages, the number of these enterprises is not much, and there is no active market related to the agricultural sector, so the Applying IAS/IFRS in general and IAS41 in particular in this field is still very difficult. Accordingly, the recognition of biological assets and agricultural products in Vietnam is being applied under VAS02 - Inventories (applicable to unharvested products recognized as work-in-progress, finished products). harvested products are recorded as finished products) and VAS 03 - Tangible fixed assets (whereby biological assets are also tracked based on three criteria: cost, accumulated depreciation and carrying value. ), biological asset records, as well as agricultural products based on the historical cost principle.

Fourth, with the characteristic of being an agricultural country, there are not many professional development plans and production models in Vietnam. Therefore, research on applying IAS41 or issuing separate accounting standards on agriculture is still an issue that needs to be considered and studied carefully by policy makers.

Thus, in the coming time, should Vietnam apply International Accounting Standard IAS41 or develop a separate Vietnamese accounting standard on agriculture or keep the current agricultural accounting method? It is a great concern to state management agencies, to accounting practitioners and research professionals. The article raises some issues as below:

Issue 1: The reason why Vietnam does not have a separate accounting standard for the agricultural sector, the major reason is that the number of listed agricultural enterprises is small, the industry size is quite small (less than 5% of the market capitalization) so accounting issues in the agricultural sector have not been taken seriously. In addition, there are a number of other causes leading to this situation, such as:

(i) The market and distribution channels in Vietnam are fragmented, small, poorly preserved, etc., making the value of agricultural products not high;

(ii) The vast majority of agricultural products belong to the household sector - an area where accounting is not used, and there is no need for complicated and difficult international standards.

Issue 2: Although IAS 41 has been applied in many countries around the world, but there are some main obstacles that prevent it applied in Vietnam. The biggest obstacle comes from the market: Vietnam lacks active markets and liquidity as the basis of fair value valuation for

biological assets and agricultural products. In addition, the cost to measure and track biological assets at fair value at the end of each financial year or each interim reporting period may outweigh the benefits achieved so it is also a major barrier.

Issue 3: The need to apply IAS 41 in the agricultural sector in Vietnam. There are two opposing views when assessing the need to apply IAS 41 in the agricultural sector in Vietnam:

+ The first line of opinion: Vietnam needs to develop accounting standards on agriculture, towards the application of IAS 41. The reasons given include: Vietnam is an agricultural country it is necessary to not have a separate VAS. In addition, the application of IAS 41 helps to solve the limitations of VAS 2 and VAS 3 for biological assets and agricultural products, overcome the lack of information. Thereby, it increases revenue as well as attracts foreign direct investment (FDI) and follows the trend of international integration in finance, accounting and agriculture.

+ Second line of opinion: Vietnam does not need to develop accounting standards on agriculture together with moving to apply IAS 41 due to: The number of listed agricultural enterprises is small, the scope is narrow and the practice is difficult to implement. ; IAS 41 should only be applied and really effective in developed countries, or Vietnam can develop a new accounting standard in the agricultural sector to suit domestic socio-economic conditions. In addition, experts said: feasibility, necessity and effectiveness show that it is not time for Vietnam to issue and apply this standard.

Issue 4: The choice of the State management agency on accounting activities is under the pressure of financial information transparency and the trend of integration with IFRS/IAS. 79% of experts believe that the state management agency should develop a new standard of agricultural activities based on IAS 41, it helps creating conditions for Vietnam to slowly accept IAS 41. The choice of direct application IAS 41 or issuing a separate Vietnamese standard on the basis of IAS 41 depends on the strategy of the Ministry of Finance for the entire system of Vietnamese accounting standards. Two of the barriers to the full application of IFRS in Vietnam are: language and professional practice habits of accountants (IFRS is based on principles, while the Vietnamese accounting system is based on rules). Therefore, a general direction drawn from a number of countries that have applied is to allow direct application of IFRS but still issue national standards in the direction of closely following IFRS; and in order to issue a new standard based on IAS 41, Vietnam needs a suitable roadmap from survey and assessment in the process of research implementation.

Issue 5: The necessary basic conditions for Vietnam to apply IAS 41: Vietnamese accounting standards need to recognize and put into use the fair value accounting principle. In addition, there is a need for an active and liquid market to create a reliable reference base, to measure fair value reliably for biological assets and agricultural products, to have high-quality human resources having the ability to understand and apply International Financial Reporting Standards IFRS in general and IAS 41 in particular. Futher, the Government should continue to issue and implement preferential policies to encourage businesses develop agriculture, move towards listing on the exchange, expand the industry scale, create competitive pressure and increase opportunities for international integration. In addition, an appropriate roadmap (both in the short and long term) is required for the application of this Standard.

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Issue 6: Assess the applicability of IAS 41 in Vietnam. Based on the above necessary basic conditions, experts agree with the option that Vietnam can apply IAS 41 but it takes time to complete the conditions. It is necessary to develop an appropriate roadmap to put IAS 41 into practice in accordance with domestic conditions. Thus, the majority of experts agree that Vietnam is necessary and capable of applying IAS 41, and Vietnamese Accounting Standards are also tending to amend and supplement in the direction based on Financial Reporting Standards. IFRS/

IAS, creating an accounting basis in line with international practices.