Financial statements and the basics according to Vietnam’s regulations that every business needs to know

1. What is a financial statement?

According to Clause 1 Article 3 of the Law on Accounting of Vietnam, financial statement means a system of financial information of an accounting unit demonstrated according to a form provided for by accounting standards and accounting regime.

In fact, it can be understood that the financial statement is the most general report on the situation of assets, equity and liabilities as well as the financial position and business results in the period of the enterprise. In addition, financial accounting reports are a means of presenting the profitability and financial status of the business to those interested (business owners, investors, lenders, tax authorities and authorities, etc.)

Thus, financial statements have an important meaning in analyzing, researching and discovering potential possibilities and is an important basis for making decisions on management and administration of production and business activities or investment of the owners, investors, current and future creditors of the enterprise.

2. Purposes of making financial statements

Based on contents of financial statements as prescribed in Appendix 2 issued together with Circular No. 200/2014/TT-BTC of the Ministry of Finance of Vietnam on guidelines for accounting policies for enterprises, it can be seen that financial statements are used to provide information about financial situations, trading performance and cash flows of enterprises, meet the requirements for management of employers, regulatory agencies and useful demands of users in making economic decisions.

Financial statements must provide information about an enterprise about:

- Assets;

- Liabilities;

- Owner’s equity;

- Revenue, other income, production and business costs and other expenses;

- Profit, loss and allocation of income ;

- The cash flows;

- …

>> View more: Compilation of financial reporting forms according to Circular 200.

3. Entities of financial statements

According to Article 99 of Circular No. 200/2014/TT-BTC of the Ministry of Finance of Vietnam, entities of financial statements are specified as follows:

Entities of annual financial statements: Annual financial statement system is applied to all types of enterprises in all sectors and economic sectors (financial statements must be prepared fully).

Entities of interim financial statement (quarterly financial statements and semi-annual financial statements):

- Enterprises of which 100% charter capital or controlling shares is held by the State, units of the public interest must prepare interim financial statements;

- Other enterprises which are not subject at point and above are recommended to prepare interim financial statements (optional).

Note: Interim financial statements are prepared fully or summarily. Unit owners decide to choose the full or summary form for interim financial statements of their units if it is not contrary to the provisions of law that the units are subject to adjustment.

Moreover, superior enterprises whose subordinate units have no legal status must prepare their own financial statements and summarized financial statements. The summarized financial statements are prepared on the basic of including figures from all subordinate units without legal status and must exclude all figures arising from internal transactions between superior and subordinate units, among  subordinate units.

Note: Subordinate units without legal status must establish their financial statements in accordance with the reporting period of superior units to serve summarizing financial statements of superior units and inspection of state management agencies.

4. Published contents of financial statement

According to Article 31 of the Law on Accounting of Vietnam, published contents of financial statement include:

- Assets, liabilities and owner’s capital;

- Business performance;

- Development and use of funds;

- Workers’ incomes;

- Other contents required by law.

A financial statement shall be published in one of the following manner: publication; written notice; posting; publication on a website; other manners prescribed by law.

Note: Accounting units doing business shall publish their annual financial statements within 120 days from the end of the annual accounting period.

5. Deadline for submission of financial statements

According to Article 109 of Circular No. 200/2014/TT-BTC of the Ministry of Finance of Vietnam, deadline for submission of financial statements is specified as follows:

For state-owned enterprises

* Deadline for submission of quarterly financial statements:

- Accounting unit must submit quarter financial statements at the latest 20 days from the end of the quarterly accounting period; It is at the latest 45 days for the parent companies, state-owned general companies;

- accounting unit affiliated enterprises, state-owned general companies submit quarter financial statements to parent companies, general companies under the time limit set by parent companies, general companies.

* Deadline for submission of annual financial statements:

- Accounting unit must submit annual financial statements at the latest 30 days from the end of the annual accounting period; It is at the latest 90 days for the parent companies, state-owned general companies;

- Accounting unit affiliated state-owned general companies submit annual financial statements to parent companies, general companies under the time limit set by parent companies, general companies.

For other types of enterprises

- Accounting unit being private enterprises and partnership must submit annual financial statements at the latest 30 days from the end of annual accounting period; for other accounting units, the deadline for submission of annual financial statements is within 90 days;

- Subordinate accounting unit affiliated submit annual financial statements to superior accounting unit within the time limit given by the superior accounting units

6. Fines for violations against regulations on creation and presentation of financial statements

According to Article 11 of Decree No. 41/2018/NĐ-CP of Vietnam’s Government on penalties for administrative violations in the fields of accounting and independent audit, fines for violations against regulations on creation and presentation of financial statements are specified as follows:

Le Vy

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