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Main Components and Attributes of Knowledge Resources Presented on Financial Statements of Vietnamese Enterprises

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Table 3.2: Main components and attributes of knowledge resources presented on the financial statements of Vietnamese enterprises


Numerical order

Content

I

Human resources

1

Entrepreneurial spirit

2

Education and training

3

Job knowledge

4

Ability to work

5

Job skills

II

Organizational resources

1

Management philosophy

2

Management processes

3

Corporate culture

4

Information system

III

Relationship resources

1

Business partnerships

2

Company names

3

Customers

4

Customer loyalty

5

Distribution channels

6

Trademarks

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Main Components and Attributes of Knowledge Resources Presented on Financial Statements of Vietnamese Enterprises

Source: Author's synthesis and recommendations.


Method of determining intellectual assets presented on the Statement of financial position

Building a method to identify an enterprise's knowledge assets should be based on three qualitative criteria stated in IAS 38 (and may be adjusted later), including:

- The ability to identify assets (separate from physical assets and formed from contracts or legal agreements). This is a prerequisite for identification.

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identify a knowledge resource as a firm asset. For example , to identify an employee innovation as a firm asset, the firm needs to demonstrate ownership of the innovation through intellectual property rights certification.

- The issue of control (having the right to benefit from the asset). This factor stems from the first factor. Along with the right to own the asset, the enterprise must gain the right to operate and exploit the asset. For example , applying an initiative in production and business to bring about economic efficiency.

- Future economic benefits (generating revenue or reducing costs for the business). This factor needs to be clearly explained when determining assets. For example , estimate the percentage increase in labor productivity in the business when applying an initiative.

Enterprise knowledge resource assessment index system

There are many methods to measure intellectual resources, such as the market to net book value method, the calculated intangible value method (CIV), the direct intellectual capital method, the method of determining the intellectual value proposed by Baruch Lev or Paul Strassmann... These methods are not widely accepted because of their certain limitations. For example, in the CIV method, the cost of capital will impose the net present value of intangible assets, or in the direct method, the calculation technique is still not perfect and it is very difficult to determine all the components of an enterprise's intellectual resources...

Therefore, in addition to perfecting knowledge resource measurement models, building a knowledge resource evaluation index system can be considered a useful way to report business performance.

Based on the roadmap outlined above, the thesis summarizes the basic issues that guide Vietnam in building an index to evaluate business knowledge resources, based on international models and practices.

The framework model for building the coefficients for evaluating the enterprise's knowledge resources is outlined below. This model is based on a proposal by Abeysekera (2003) and the author's synthesis and analysis ( Figure 3.3 ).

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Common factors

Profit, revenue, net assets

item

knowledge


Common factors

Fair value, change in fair value

Measurement model


Widely accepted





Measurement Model Not Widely Accepted

Financial items


The resources t


Index

Fair value, market value, industrial stock index


Building indexes

Ratios








Profit report

Knowledge revenue item

• Secret

• Authority

• Convenient disclosure

• Repeat customer revenue

Knowledge cost item

• Complaints

• Absence costs

• Union relations

• Disclose the disadvantages

• Sick leave

• Accidents.

Financial Statement

Knowledge asset item

• Training costs

• Brand loyalty

• Intellectual property

• Customer loyalty

• Strategic customers

• Expert's seniority

• Technological process

Knowledge debt item

• Large customer balance

• Taxes, tax increases.


Figure 3.3 : Framework model for building coefficients to evaluate knowledge resources of Vietnamese enterprises

Source : Abeysekera (2003) and synthesis, proposed by the author .

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The coefficients for evaluating enterprise knowledge resources proposed from the above model are illustrated in Appendix 17 .


3.2.2.3. Orientation for recording and reporting corporate social responsibility on financial statements

(a) Overview of social responsibility and requirements for presenting corporate social responsibility on financial statements

There are many approaches to Corporate Social Responsibility (CSR).

According to the European Commission (2011), CSR is the responsibility of businesses for their impact on society. Anguss Duff (2011) refers to social responsibility as the positive impact and amelioration of negative impacts of businesses on society and the environment, through its activities, products, services and interactions with stakeholders such as employees, customers, investors, communities and suppliers.

Stone (2005) analyzes the concept of CSR into mandatory, recognized and discretionary responsibilities towards the community of the enterprise. Meanwhile, the European Commission divides social responsibility into internal aspects (including: human resource management, occupational health and safety, adapting to change, environmental impact management and natural resources) and external aspects (including: local community, business partners, suppliers and consumers, human rights, global environmental issues) (EC, 2001).

The issues of social responsibility , according to Quazi and O'Brien (2000), include: environmental protection; good relations with employees; ensuring shareholder benefits; consumer benefits and safety; good performance of supplier responsibilities, contributing to the social community. According to Tilt (2010), CSR includes: ethics; governance; social activities such as charity and community participation; product safety; equal opportunity; human rights and environmental activities.

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Implementing social responsibility in general and environmental protection in particular brings significant benefits to businesses. Milton Friendman, an American economist who won the Nobel Prize in Economics, said: "Corporate social responsibility will increase their profits". The policy of reducing waste and waste in production will reduce business costs. Consumers may be willing to spend more or pay higher prices for products and services that have less impact on the environment, with the brand name "green products". Marketing and advertising through social activities and environmental protection have proven to be much more effective than traditional marketing methods. Research by Schmitdt (2003) cited by Nguyen Dinh Hung (2009) also shows that there is a certain correlation between the results of implementing social and environmental protection and the financial results of businesses.

Social responsibility accounting focuses on the contribution of businesses to society and the environment through their activities. Currently, the IASB prescribes the content applicable to environmental liabilities and provisions in IAS37 - Provisions, contingent assets and liabilities and IFRS 3 - Business combinations. Recent analysis shows the diversity in social responsibility reports, including commitment reports, environmental reports, economic and social performance reports (also known as 3 P reports: people, planet, profit) and as part of annual reports or financial statements, as well as the diversity in the format, level and nature of the reports, especially across industries and between countries (Labelle, 2006 cited by Tilt, 2010).

In many countries around the world, more and more businesses are interested in and implementing social responsibility reports. A study by KPMG on 250 leading companies (G 250) in 21 countries showed that the rate of companies reporting on social responsibility (in a separate report or as part of the annual report) increased from an average of 45% in 2000 to 64% in 2005, 83% in 2008 and 95% in 2011. Japan, an Asian country, is considered a leading country in implementing social responsibility reports. Accordingly, the rate of businesses in Japan reporting on social responsibility implementation (in KPMG research data) in 2008 was 93%, in 2011 was 99% (KPMG, 2011) .

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Businesses around the world are increasingly recognizing that CSR reporting drives innovation and research, helping companies grow their businesses and increase organizational value. Companies that do not yet report on their CSR activities are beginning to come under significant pressure. This will become increasingly important, not only to compete in a social context, but also to gain a better understanding of how CSR activities impact and benefit businesses such as cost savings and the creation of new business opportunities (KPMG, 2011).

Thus, similar to the recognition and presentation of intellectual resources, although there is not yet a complete basis for regulations on principles, content and methods, the recognition and reporting of corporate social responsibility on financial statements or annual reports is currently an inevitable trend in many countries around the world.

In Vietnam, corporate social responsibility reporting is not a new thing. Some large enterprises and corporations such as Vinamilk, VNGroup... have reported on social responsibility implementation since 2007. A study by the Institute of Labor Science and Social Affairs in 2008 at textile and footwear enterprises showed that, thanks to social responsibility implementation, labor productivity increased from 34.2 million to 35.8 million VND/person/year (Nguyen Dinh Hung, 2009).

However, there are currently many barriers and challenges to implementing and reporting on CSR in Vietnam. Limited awareness of social responsibility in general and environmental protection in particular among enterprises; lack of financial resources and methods to implement social responsibility standards; no framework on principles or content of CRS reporting applicable to enterprises; CSR reporting is mainly spontaneous, the number of enterprises reporting CRS is very small, mainly concentrated in large-scale enterprises.

From the above situation, to meet the requirements of the international integration process in accounting, Vietnam cannot help but research and gradually apply the recognition and reporting of social responsibility on corporate financial statements according to international trends and practices, with an appropriate roadmap.

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(b) Roadmap for applying social responsibility reporting on financial statements of Vietnamese enterprises

Based on the level of requirements of the integration process and the conditions of Vietnam, the thesis orients the roadmap for applying the recognition and reporting of knowledge resources on corporate financial statements as follows:

From now until the end of 2016

Firstly , implement propaganda, dissemination, seminars... to raise awareness of the meaning and benefits of implementing CSR and reporting CSR, creating consensus from businesses, accountants to users of information on financial statements. Gradually turn the implementation of social responsibility in general and to the environment in particular of businesses into an internal motivation for administrators.

Second, review and adjust VAS 18 - Provisions, contingent assets and liabilities and VAS 11 - Business combinations in accordance with the provisions of IAS 37 and IFRS 3. Issue regulations and guidelines on basic issues on social responsibility reporting in general and environmental costs in particular, such as the scope of contents that need to be reported or explained, presentation of social responsibility assessment indexes, etc. The regulations are mandatory first of all for listed companies and corporations, and are encouraged to be applied to other types of enterprises.

From 2017-2020

Firstly , build a legal corridor that requires businesses to fully and seriously fulfill their responsibilities towards the environment, including: supplementing, completing, fully and synchronously implementing legal documents on environmental protection, for example, specific regulations on air quality, water quality, solid waste, toxic waste, biodiversity, etc.; strictly enforcing regulations on environmental protection, resolutely handling violations, not taking environmental protection regulations lightly for immediate goals (such as attracting investment capital).

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Second , based on the new guidelines and regulations of IASB as well as the application in countries, update, regulate and guide the recognition and presentation of social responsibility reports on Vietnamese financial statements in accordance with IASB and international practices.

(c) Orientation of some CSR reporting contents on the Vietnamese enterprise financial reporting system

Based on the objectives and scope of the thesis, this section only presents the orientation of basic issues on presenting social responsibility on financial statements, in the spirit of harmony with international practices.

Elements of CSR presented in the Financial Statements or Annual Reports

Social responsibility reporting is still a relatively new issue for countries. The determination of the content, the elements of CSR presented in the report and its priority are currently not the same between countries and businesses.

The content and elements of CSR presented in the Financial Statements or Annual Reports that this thesis proposes below are mainly based on: The 2008 United Nations Guidelines on Social Responsibility Indicators in Annual Reports (UNCTAD/ITE/TEB/2007/6); CSR elements that have been commonly presented in Japanese enterprises and some Asian countries; and the author's synthesis and recommendations.

The basic content of the CSR Report on the financial reporting system of Vietnamese enterprises, according to the thesis, is presented in Table 3.3.

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