What is included in the annual financial statement system applied to small and medium enterprises satisfying the going concern assumption in Vietnam?
- When are small and medium enterprises considered a going concern?
- What is included in the annual financial statement system applied to small and medium enterprises satisfying the going concern assumption in Vietnam?
- What are the rules for preparing and presenting financial statements of enterprises satisfying the going concern assumption in Vietnam?
When are small and medium enterprises considered a going concern?
Pursuant to Article 74 of Circular No. 133/2016/TT-BTC stipulating:
Rules for preparing and presenting financial statements of enterprises not satisfying the going concern assumption
1. When preparing a financial statement, the enterprise is considered satisfying going concern assumption. An enterprise does not satisfy going concern assumption if it fails to submit an application for extension of the operation period, is dissolved, bank rapt, shut down (according to written notification to a competent authority) within 12 months from the day on which the financial statement is prepared (for enterprises whose ordinary course of business is not longer than 12 months) or within an ordinary course of business (for enterprises whose ordinary course of business is longer than 12 months).
2. An enterprise satisfies going concern assumption in the following cases:
- Change of form of ownership, change of type of business entity e.g. conversion of a limited liability company into a joint-stock company and vice versa;
- Conversion of a unit having an independent legal status into a unit without independent legal status e.g. conversion of a subsidiary company into a branch or vice versa.
According to the above regulations, an enterprise does not satisfy going concern assumption if it fails to submit an application for extension of the operation period, is dissolved, bank rapt, shut down (according to written notification to a competent authority) within 12 months from the day on which the financial statement is prepared.
Thus, when not falling into the above cases, small and medium enterprises are considered going concern. Note, an enterprise satisfies going concern assumption in the following cases:
- Change of form of ownership, change of type of business entity e.g. conversion of a limited liability company into a joint-stock company and vice versa;
- Conversion of a unit having an independent legal status into a unit without independent legal status e.g. conversion of a subsidiary company into a branch or vice versa.
What is included in the annual financial statement system applied to small and medium enterprises satisfying the going concern assumption in Vietnam? (Image from the Internet)
What is included in the annual financial statement system applied to small and medium enterprises satisfying the going concern assumption in Vietnam?
Pursuant to Clause 1, Article 71 of Circular No. 133/2016/TT-BTC, the annual financial statement system applied to small and medium enterprises satisfying the going concern assumption include:
(1) Mandatory statements:
- Financial position statement: Form B01a - DNN
- Business outcome statement: Form B02 - DNN
- Notes to financial statement: Form B09 - DNN
The enterprise may use Form B01b - DNN instead of Form B01a – DNN to prepare the financial position statement if it is more appropriate.
The financial statement submitted to the tax authority must be enclosed with the balance sheet (Form F01 - DNN).
(2) Optional statements:
- Cash flow statement: Form B03 - DNN
What are the rules for preparing and presenting financial statements of enterprises satisfying the going concern assumption in Vietnam?
Pursuant to Article 73 of Circular No. 133/2016/TT-BTC, the rules for preparing and presenting financial statements of enterprises satisfying the going concern assumption include:
- A financial statement must correctly reflect the nature of transactions and events rather than their legal form.
- The value of an asset be recorded must not be higher than the recoverable value; the value of a liability be recovered must not be lower than the value payable.
- Classification of assets and liabilities: assets and liabilities on a financial position statement shall be sorted by liquidity in descending order, or by term (short-term and long-term). Those in the financial position statement of an extra-small enterprise may be sorted by liquidity in descending order.
- If assets and liabilities of a financial position statement are sorted by term.
Assets and liabilities in the financial position statement shall be classified as short-term and long-term according to the enterprise’s ordinary score of business. To be specific:
+ If the enterprise’s ordinary score of business is 12 months, its assets and liabilities shall be classified as short-term and long-term as follows:
++ Assets to be obtained or liabilities to be paid within 12 months from the date of the financial statement shall be classified as short-term;
++ Assets to be obtained or liabilities to be paid after 12 months from the date of the financial statement shall be classified as long-term.
+ If the enterprise’s ordinary score of business longer than 12 months, its assets and liabilities shall be classified as short-term and long-term as follows:
++ Assets to be obtained or liabilities to be paid within an ordinary course of business shall be classified as short-term;
++ Assets to be obtained or liabilities to be paid after an ordinary course of business shall be classified as long-term.
In this case, the enterprise must explain its ordinary course of business and provide evidence.
+ Regarding enterprises whose assets and liabilities cannot be classified by term because of the nature of their operations, their assets and liabilities shall be presented as instructed in (a).
- Assets and liabilities shall be separately presented. Only assets and liabilities related to the same entity, derived from the transactions and events of the same category may be offset against each other.
- Revenues, incomes and expenses shall be presented in accordance with matching principle and conservatism principle. The income statement and cash flow statement reflect the revenues, incomes, expenses and cash flows of the accounting period.
Material errors in revenues, incomes, expenses of previous periods that affect the business performance and cash flows must be retrospectively adjusted by making another statement instead of directly adjusting the erroneous statement. Extra-small enterprises may directly adjust the erroneous statements.
LawNet