Regulations on the use of financial statements in business valuation from July 1, 2024 in Vietnam

Regulations on the use of financial statements in business valuation from July 1, 2024 in Vietnam​ (Image from the Internet)

On May 16, 2024, the Minister of Finance of Vietnam issued Circular 36/2024/TT-BTC on Vietnamese Valuation Standards regarding business valuation.

Regulations on the use of financial statements in business valuation from July 1, 2024 in Vietnam

Article 6 of the Vietnamese Valuation Standards on business valuation issued together with Circular 36/2024/TT-BTC provides regulations on the use of financial statements in business valuation from July 1, 2024, as follows:

(1) The use of financial statements in business valuation shall be based on the chosen valuation approach and methodology, the time of valuation, and the characteristics of the enterprise being valued. Priority shall be given to financial statements audited or reviewed by an independent auditing firm.

(2) Verify and check the reasonableness of the financial statements to ensure reliability; if necessary, request the enterprise being valued to adjust the financial data on the financial statements before incorporating these data into information analysis, applying valuation approaches and methods to serve the business valuation. If the enterprise does not make adjustments, identify discrepancies and clearly analyze the reasons and basis for adjustments, and explicitly state them in the valuation report.

(3) In cases where unaudited or unreviewed financial statements are used, or where audited or reviewed financial statements contain opinions other than a full acceptance opinion, this limitation must be clearly stated in the limitations section of the valuation report, the valuation certificate, or the valuation result notification to inform the requesting organization, individual, and the users of the valuation results.

(4) For valuation methods under the market approach: when using data from the financial statements of the enterprise to be valued, compare the enterprise to calculate indicators such as earnings per share (EPS) and earnings before interest, taxes, depreciation, and amortization (EBITDA) in calculating market ratios for valuation purposes. Adjust to exclude non-operating income and expenses and unusual, non-recurring sources of income and expenses.

(5) For valuation methods under the income approach: when using profit data from the financial statements of the most recent years of the enterprise being valued, to forecast future annual income streams, exclude unusual, non-recurring expenses and income and exclude non-operating income and expenses.

(6) Unusual, non-recurring expenses and profits include: costs related to enterprise restructuring; recognized gains or losses from asset sales; changes in accounting estimates; recognized inventory devaluation; impairment of goodwill; debt write-offs; losses or gains from court decisions, and other unusual, non-recurring profits and expenses. When making adjustments, consider the impact of corporate income tax (if any).

See also the Vietnamese Valuation Standards on business valuation at Circular 36/2024/TT-BTC, effective from July 1, 2024.

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