Who prepares financial statements for external users in Vietnam?
Financial statements provide critical economic and financial information for assessing the situation and results of production and business activities, as well as an enterprise’s financial status. Therefore, investors pay a lot of attention to this kind of document. Who takes responsibility for the financial statement of an enterprise? To have an insight of this problem, follow this article of LSX legal firm: “Who prepares financial statements for external users in Vietnam?”
Legal grounds
- Circular 200/2014/TT-BTC
- Decree 17/2012/ND-CP
- Law on Independent Audit 2011
The purpose of financial statements
According to the provisions of Clause 1, Article 3 of the Law on Accounting 2015, 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.
Purposes of financial statements:
According to Article 97, Circular 200/2014/TT-BTC regulating the purpose of financial statements:
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 :
- Firstly, assets;
- Secondly, liabilities;
- Thirdly, owner’s equity;
- Fourthly, revenue, other income, production and business costs and other expenses;
- Also, profit, loss and allocation of income ;
- Lastly, the cash flows.
In addition to this information, an enterprise must also provide other information in the “Notes to the Financial Statements” for further explanation of standards recorded in general financial statements and accounting policies applied to record the economic transactions arising, preparation and presentation of financial statements.
The role of financial statements:
- Firstly, provide necessary economic and financial indicators to identify and comprehensively check the situation of production and business activities of enterprises.
- Secondly, provide necessary data and documents for the analysis of economic and financial activities to identify and assess the business situation, financial status, and efficiency of capital use of the enterprise.
- Thirdly, based on the data shown in the financial statements to analyze, detect economic potential, predict the situation, operating trends of the business to make the right and effective decisions.
- Fourthly, provide data for appropriate production, business and investment planning.
Periods of financial statement
Firstly, periods of annual financial statements: Enterprises must prepare annual financial statements in accordance with the Law on Accounting.
Secondly, periods of interim financial statements: Interim financial statements shall include quarter financial statements (including quarter IV) and semi-annual financial statements.
Thirdly, periods of other financial statements:
- Enterprises may establish financial statements in accordance with other accounting periods (such as a week, month, 6 months, or 9 months …) as required by law, parent companies, or owners.
- Accounting units divided, splited, amalgamated, or conversed their ownership, dissolved, terminated their operation, and bankrupt must prepare financial statements at the time of division, split, amalgamation or conversion of ownership, dissolution, termination of activities, or bankruptcy.
Fourthly, determination of the sum year of financial statements of financial and statistic agencies, when summarizing statistics, in case of receipt of financial statements of enterprises whose fiscal year is different from the calendar year, State management agencies shall comply with the following principles:
- In case the financial statements of the enterprises begin on April 1 and end on March 31 annually, the figures on financial statements shall be summarized statistics on figures of the preceding year;
- In case the annual financial statements of enterprises begin on July 1 and end on June 30 annually, financial statements used to summarize statistics are semi-annual financial statements;
- If financial statements of the enterprises begin on October 1 and end on September 30 annually, the figures on financial statements shall be summarized statistics on figures of the following year;
Who prepares the financial statements for external users?
The person making the financial statements is an enterprise. The business owner must take responsibility for administering the preparation of the financial statements to send outside.
The financial statements must have full signatures, including the signature of the director and the seal. The director is primarily responsible for the financial statements, not the chief accountant. The accountant has the responsibility for preparing financial statements according to relevant principles and regulations.
Subjects required to audit financial statements
Enterprises and organizations whose annual financial statements, as prescribed by law, must be audited by the audit firm, branches of the foreign audit firm in Vietnam, include:
- Firstly, enterprises with foreign owned capital.
- Secondly, credit institutions established and operate under the Law on credit institutions, including branches of foreign banks in Vietnam.
- Thirdly, financial organizations, insurance companies, reinsurance companies, insurance brokerage companies, and branches of foreign non-life insurance companies.
- Fourthly, public companies, securities issuing organizations, and securities trading organizations.
Other enterprises and organizations subject to compulsory auditing under relevant provisions of law.
Enterprises and organizations subject to audit by the audit firm and branches of foreign audit firms including:
- Firstly, state enterprises, except those operating in the field of state secrets as prescribed by law; must be audited for the annual financial statements.
- Secondly, enterprises, and organizations implementing the national important projects; group-A projects using state funds; except for the projects in the field of state secrets as prescribed by law; must be audited for the settlement report of project completion.
- Thirdly, enterprises and organizations with 20% or more of the voting rights held by state groups, and state corporations at the end of the fiscal year must be audited for annual financial statements;
- Fourthly, enterprises with 20% or more of the voting rights held by securities listing, issuing, and trading organizations; at the end of the fiscal year must be audited for annual financial statements.
- Lastly, the audit firm and branches of foreign audit firms in Vietnam must be audited for annual financial statements.
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Related questions
Financial condition statement;
Business performance statement;
Cash flow statement;
Note to financial statements;
Other statements defined by law.
Accounting units that do not use state budget, accounting units using the people’s contributions shall publish their annual financial statements within 30 days from their submission dates.
– Assets, liabilities and owner’s capital;
– Business performance;
– Development and use of funds;
– Workers’ incomes;
– Other contents required by law.
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