PRESENTATION OF FINANCIAL STATEMENTS
04. This Standard applies to all types of enterprises. Additional requirements for banks, credit institutions and financial institutions are set out in Standard “Disclosures in the Financial Statements of Banks and Similar Financial Institutions”.
CONTENTS OF the STANDARD
PURPOSE OF FINANCIAL STATEMENTS
05. Financial statements are a structured financial representation of the financial position of and the transactions undertaken by an enterprise. The objective of general-purpose financial statements is to provide information about the financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions. To meet this objective, financial statements provide information about an enterprise’s:
(d) revenue, other income, expenses, gains and losses;
(e) cash flows.
This information, along with other information in the notes to financial statements, assists users in predicting the enterprise’s future cash flows and in particular the timing and certainty of the generation of cash and cash equivalents.
RESPONSIBILITY FOR PREPARATION AND PRESENTAION OF FINANCIAL STATEMENTS
06. The director (or leader) of an enterprise is responsible for the preparation and presentation of its financial statements.
COMPONENTS OF FINANCIAL STATEMENTS
07. A complete set of financial statements includes the following components:
(a) Balance sheet;
(b) Income statement;
08. Enterprises are encouraged to present, outside the financial statements, a review by management which describes and explains the main features of the enterprise’s financial performance and financial position and the principal uncertainties it faces if management believes they will assist users in making economic decisions.
REQUIREMENTS FOR PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS
09. Financial statements should present fairly the financial position, financial performance and cash flows of an enterprise. To achieve a fair presentation, financial statements should be prepared and presented in compliance with prevailing accounting standards, accounting policies and related regulations.
10. An enterprise whose financial statements comply with Vietnamese accounting standards and accounting policies should disclose that fact in the notes to the financial statements. Financial statements should not be described as complying with Vietnamese accounting standards and accounting policies unless they comply with all the requirements of each applicable standard and policy and each applicable regulations of the Ministry of Finance guiding the implementation of the Vietnamese Accounting Standards.
In case that an enterprise applies accounting policies which are not in accordance with Vietnamese accounting standards and accounting policies, it is not then considered as complying with prevailing accounting standards even though it is fully disclosed in the Notes to the financial statements.
11. A fair presentation of financial statements requires:
(a) selecting and applying accounting policies in accordance with paragraph 12;
(b) presenting information, including accounting policies, in a manner which provides relevant, reliable, comparable and understandable information;
(c) providing additional disclosures when the requirements in Vietnamese Accounting Standards are insufficient to enable users to understand the impact of particular transactions or events on the enterprise’s financial position and financial performance.
12. An enterprise should select and apply accounting policies so that the financial statements comply with all requirements of each applicable Vietnamese accounting standard. Where there is no specific requirement, the enterprise should develop policies based upon the Framework to ensure that the financial statements provide information that is:
(a) relevant to the decision-making needs of users;
(b) reliable in that they:
- represent fairly the results and financial position of the enterprise;
- reflect the economic substance of events and transactions and not merely the legal form;
- are neutral, that is free from bias;
- are prudent;
- are complete in all material respects.
13. Accounting policies are the specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements.
14. In the absence of a specific accounting standard, in developing an accounting policy, an enterprise considers:
(a) the requirements and guidance in accounting standards dealing with similar and related issues;
(b) the definitions, recognition and measurement criteria for assets, liabilities, income and expenses set out in the Framework;
Requirements in preparation and presentation of financial statements:
15. When preparing financial statements, the Director (or leader) of an enterprise should make an assessment of the enterprise’s ability to continue as a going concern. Financial statements should be prepared on a going concern basis unless the enterprise either intends to liquidate the enterprise or to cease trading, or has no realistic alternative but to do so. When the Director (or leader) of the enterprise is aware, in making its assessment, of material uncertainties related to events or conditions which may cast significant doubt upon the enterprise’s ability to continue as a going concern, those uncertainties should be disclosed. When the financial statements are not prepared on a going concern basis, that fact should be disclosed, together with the basis on which the financial statements are prepared and the reason why the enterprise is not considered to be a going concern.
16. In assessing whether the going concern assumption is appropriate, the Director (or leader) of an enterprise takes into account all available information for the foreseeable future, which should be at least twelve months from the balance sheet date.
Accrual basis of accounting
17. An enterprise should prepare its financial statements, except for cash flow information, under the accrual basis of accounting.
18. Under the accrual basis of accounting, transactions and events are recognised when they occur and not as cash or its equivalent is received or paid; and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. Expenses are recognised in the income statement on the basis of a direct association between the costs incurred and the earning of specific items of income (matching). However, the application of the matching concept does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities.
Consistency of presentation
19. The presentation and classification of items in the financial statements should be retained from one period to the next unless:
(a) a significant change in the nature of the operations of the enterprise or a review of its financial statement presentation demonstrates that the change will result in a more appropriate presentation of events or transactions; or
(b) a change in presentation is required by another accounting standard
20. A significant acquisition or disposal, or a review of the financial statement presentation, might suggest that the financial statements should be presented differently. Only if the revised structure is likely to continue, or if the benefit of an alternative presentation is clear, should an enterprise change the presentation of its financial statements. When such changes in presentation are made, an enterprise reclassifies its comparative information in accordance with paragraph 30 and discloses the reasons for changes together with the impacts on the financial statements in the accompanying notes.
Materiality and aggregation
25. Assets and liabilities should not be offset except when offsetting is required or permitted by another accounting standard.
26. Items of revenue, other income and expense should be offset when, and only when:
(a) an accounting standard requires or permits it; or
(b) gains, losses and related expenses arising from the same or similar transactions and events are not material. Such amounts should be aggregated in accordance with paragraph 21.
27. It is important that assets and liabilities, and income and expenses, when material, are reported separately. Offsetting in either the income statement or the balance sheet, except when offsetting reflects the substance of the transaction or event, detracts from the ability of users to understand the transactions undertaken and to assess the future cash flows of the enterprise.
28. VAS 14, “Revenue and other income”, defines the term revenue and requires it to be measured at the fair value of consideration received or receivable, taking into account the amount of any trade discounts and volume rebates allowed by the enterprise. An enterprise undertakes, in the course of its ordinary activities, other transactions which do not generate revenue but which are incidental to the main revenue generating activities. The results of such transactions are presented, when this presentation reflects the substance of the transaction or event, by netting any income with related expenses arising on the same transaction. For example:
(a) gains and losses on the disposal of non-current assets, including investments and operating assets, are reported by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses;
(b) expenditure that is reimbursed under a contractual arrangement with a third party (a sub-letting agreement, for example) is netted against the related reimbursement
29. Gains and losses arising from a group of similar transactions are reported on a net basis, for example foreign exchange gains and losses or gains and losses arising on financial instruments held for trading purposes. Such gains and losses are, however, reported separately if their size, nature or incidence is such that separate disclosure is required by Accounting Standard “Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies”.
30. Comparative numerical information should be disclosed in respect of the previous period for all numerical information in the financial statements. Comparative information should be included in narrative and descriptive information when it is relevant to an understanding of the current period’s financial statements.
31. When the presentation or classification of items in the financial statements is amended, comparative amounts should be reclassified (unless it is impracticable to do so) to ensure comparability with the current period, and the nature, amount of, and reason for, any reclassification should be disclosed. When it is impracticable to reclassify comparative amounts, an enterprise should disclose the reason for not reclassifying and the nature of the changes that would have been made if amounts were reclassified.
32. Circumstances may exist when it is impracticable to reclassify comparative information to achieve comparability with the current period. For example, data may not have been collected in the previous periods in a way which allows reclassification, and it may not be practicable to recreate the information. In such circumstances, the nature of the adjustments to comparative amounts that would have been made is disclosed. Accounting Standard “Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies” deals with the adjustments required to comparative information following a change in accounting policy that is applied retrospectively.
STRUCTURE AND BASIC CONTENT OF FINANCIAL STATEMENTS
General information about an enterprise
33. In financial statements, the following information should be prominently displayed:
(a) the registered name and address of the reporting enterprise;
(b) whether the financial statements are separate financial statements of the reporting enterprise or consolidated financial statements for a group of enterprises;
34. The requirements in paragraph 33 are presented in the financial statements. Depending on the circumstances, judgement is required in determining the best way of presenting such information. In case the financial statements are read electronically, separate pages may not be used; the above items are then presented frequently enough to ensure a proper understanding of the information given.
35. Financial statements should be presented at least annually. When, in exceptional circumstances, an enterprise’s balance sheet date changes and annual financial statements are presented for a period longer or shorter than one year, an enterprise should disclose, in addition to the period covered by the financial statements:
(a) the reason for the change in balance sheet date; and
(b) the fact that comparative amounts for the income statement, cash flows statement and related notes to the financial statements are not comparable to those of the current period.
36. In exceptional circumstances an enterprise may be required to, or decide to, change its balance sheet date, for example following the acquisition of the enterprise by another enterprise with a different balance sheet date. In this is the case, the current period figures and the comparative amounts are not comparable, and the reason for the change of the balance sheet date is disclosed by the enterprise.
The Current/Non-current Distinction
37. Each enterprise should present current and non-current assets and current and non-current liabilities as separate classifications on the face of the balance sheet. When an enterprise is unable to make this classification due to the nature of its operation, assets and liabilities should be presented descending in order of their liquidity.
38. Whichever method of presentation is adopted, an enterprise should disclose, for each asset and liability item that combines amounts expected to be recovered or settled both before and after twelve months from the balance sheet date, the amount expected to be recovered or settled after more than twelve months.
39. When an enterprise supplies goods or services within a clearly identifiable operating cycle, separate classification of current and non-current assets and liabilities on the face of the balance sheet provides useful information by distinguishing the net assets that are continuously circulating as working capital from those used in the enterprise’s long-term operations. It also highlights assets that are expected to be realised within the current operating cycle, and liabilities that are due for settlement within the same period.
Current and Non-current Assets
40. An asset should be classified as a current asset when it:
(a) is expected to be realised in, or is held for sale or consumption in, the normal course of the enterprise’s operating cycle; or
(b) is held primarily for trading purposes or for the short-term and expected to be realised within twelve months of the balance sheet date; or
(c) is cash or a cash equivalent asset which is not restricted in its use.
41. All other assets should be classified as non-current assets.
42. Non-current assets include tangible, intangible, financial assets of a long-term nature and other non-current assets.
43. The operating cycle of an enterprise is the time between the acquisition of materials entering into a process and its realisation in cash or an instrument that is readily convertible into cash. Current assets include inventories and trade receivables that are sold, consumed and realised as part of the normal operating cycle even when they are not expected to be realised within twelve months of the balance sheet date. Marketable securities are classified as current assets if they are expected to be realised within twelve months of the balance sheet date; otherwise they are classified as non-current assets.
Current and Non-current Liabilities
44. A liability should be classified as a current liability when it:
(a) is expected to be settled in the normal course of the enterprise’s operating cycle; or
(b) is due to be settled within twelve months of the balance sheet date.
45. All other liabilities should be classified as non-current liabilities.
46. Current liabilities can be categorised in a similar way to current assets. Some current liabilities, such as trade payables and accruals for employee and other operating costs, form part of the working capital used in the normal operating cycle of the business. Such operating items are classified as current liabilities even if they are due to be settled after more than twelve months from the balance sheet date.
47. Other current liabilities are not settled as part of the current operating cycle, but are due for settlement within twelve months of the balance sheet date. Examples are the current portion of interest-bearing liabilities, bank overdrafts, taxes and other non-trade payables. Interest-bearing liabilities that provide the financing for working capital on a long-term basis, and are not due for settlement within twelve months, are non-current liabilities.
48. An enterprise should continue to classify its long-term interest-bearing liabilities as non-current, even when they are due to be settled within twelve months of the balance sheet date if:
(a) the original term was for a period of more than twelve months;
(b) the enterprise intends to refinance the obligation on a long-term basis and that intention is supported by an agreement to refinance, or to reschedule payments, which is completed before the financial statements are authorised for issue.
The amount of any liability that has been excluded from current liabilities in accordance with this paragraph, together with information in support of this presentation, should be disclosed in the notes to the balance sheet.
49. Some obligations that are due to be repaid within the next operating cycle may be expected to be refinanced or ‘rolled over’ at the discretion of the enterprise and, therefore, are not expected to use current working capital of the enterprise. Such obligations are considered to form part of the enterprise’s long-term financing and should be classified as non-current. However, in situations in which refinancing is not at the discretion of the enterprise (as would be the case if there were no agreement to refinance), the obligation is classified as current unless the completion of a refinancing agreement before the authorisation of the financial statements for issue provides evidence that the substance of the liability at the balance sheet date was long-term.
50. Some borrowing agreements incorporate undertakings by the borrower (covenants) which have the effect that the liability becomes payable on demand if certain conditions related to the borrower’s financial position are breached. In these circumstances, the liability is classified as non-current only when:
(a) the lender has agreed, prior to the authorisation of the financial statements for issue, not to demand payment as a consequence of the breach; and
(b) it is not probable that further breaches will occur within twelve months of the balance sheet date.
Information to be presented on the Face of the Balance Sheet
51. As a minimum, the face of the balance sheet should include line items which present the following amounts:
52. Additional line items, headings and sub-totals should be presented on the face of the balance sheet when an accounting standard requires it, or when such presentation is necessary to present fairly the enterprise’s financial position.
53. The format in which items are to be presented on the face of the Balance Sheet applied for each type of enterprise will be prescribed in the applicable regulations providing implementation guidance to this standard. (Paragraph 51 simply provides a list of items that are so different in nature or function that they deserve separate presentation on the face of the Balance Sheet). Adjustments to the line items presented on the face of the Balance Sheet include the followings:
(a) line items are added when another accounting standard requires separate presentation on the face of the balance sheet, or when the size, nature or function of an item is such that separate presentation would assist in presenting fairly the enterprise’s financial position;
Information to be Presented Either on the Face of the Balance Sheet or in the Notes to the Financial Statements
54. An enterprise should disclose, either on the face of the balance sheet or in the notes to the balance sheet, further sub-classifications of the line items presented, classified in a manner appropriate to the enterprise’s operations. Each item should be sub-classified, when appropriate, by its nature and, amounts payable to and receivable from the parent enterprise, fellow subsidiaries and associates and other related parties should be disclosed separately.
55. The detail provided in sub-classifications, either on the face of the balance sheet or in the notes depends on the requirements of Vietnamese Accounting Standards and the size, nature and function of the amounts involved. The disclosures will vary for each item, for example:
(a) tangible fixed assets are classified as described in VAS 03 “Tangible fixed assets” into Buildings, structures; Machinery and equipments; Means of transportation, and transmission; Management tools and devices; Perennial trees, working and/or product animals; Other tangible fixed assets.
(b) receivables are analysed between amounts receivable from trade customers, inter-company receivables, receivables from related parties, prepayments and other amounts;
(c) inventories are sub-classified, in accordance with VAS 02, “Inventories”, into classifications such as materials, tools and supplies, work in progress and finished goods etc;
(d) provisions are analysed showing separately the various classes in a manner appropriate to the enterprise’s operations; and
Information to be presented on the face of the Income Statement
56. As a minimum, the face of the income statement should include line items which present the following amounts:
57. Additional line items, headings and sub-totals should be presented on the face of the income statement when required by another Vietnamese Accounting Standard, or when such presentation is necessary to present fairly the enterprise’s financial performance.
58. Descriptions used and the ordering of items are amended when this is necessary to explain the elements of performance. Factors to be taken into consideration include materiality and the nature and function of the various components of income and expenses. For example, for a bank or a similar financial institution, the presentation of the balance sheet will be more specifically prescribed in Accounting Standard “Disclosures in the Financial Statements of Banks and Similar Financial Institutions”.
59. If, due to the operation nature of an enterprise, items on the face of the income statement could not be presented based on the function of expenses, they will be presented based on the nature of expenses.
Information to be presented either on the face of the Income statement or in the Notes to the Financial statements.
60. Enterprises classifying expenses by function should disclose additional information on the nature of expenses, for example, depreciation and amortisation expenses and staff costs.
61. An enterprise should disclose in the notes the amount of dividends per share, declared or proposed, for the period covered by the financial statements.
Cash Flow Statement
62. Cash flow statement is prepared and presented in accordance with the requirements set out in VAS 24 “Cash flow statement”.
Notes to the Financial Statements
63. The notes to the financial statements of an enterprise should:
(a) present information about the basis of preparation of the financial statements and the specific accounting policies selected and applied for significant transactions and events;
(b) disclose the information required by Vietnamese Accounting Standards that is not presented elsewhere in the financial statements;
(c) provide additional information which is not presented on the face of the financial statements but that is necessary for a fair presentation.
64. Notes to the financial statements should be presented in a systematic manner. Each item on the face of the balance sheet, income statement and cash flow statement should be cross-referenced to any related information in the notes.
65. Notes to the financial statements include narrative descriptions or more detailed analyses of amounts shown on the face of the balance sheet, income statement, cash flow statement, as well as additional information. They include information required to be disclosed by others accounting standards, and other disclosures necessary to achieve a fair presentation.
66. Notes to the financial statements are normally presented in the following order and should be presented consistently in this order in order to assist users in understanding the financial statements and comparing them with those of other enterprises:
(a) statement of compliance with Vietnamese accounting standards;
(b) statement of the measurement basis (bases) and accounting policies applied;
(i) contingencies, commitments and other financial disclosures; and
(ii) non-financial disclosures.
Presentation of Accounting Policies
67. The accounting policies section of the notes to the financial statements should describe the following:
(a) the measurement basis (or bases) used in preparing the financial statements; and
(b) each specific accounting policy that is necessary for a proper understanding of the financial statements.
68. In addition to the specific accounting policies used in the financial statements, it is important for users to be aware of the measurement basis (bases) used (historical cost, current cost, realisable value, fair value or present value) because they form the basis on which the whole of the financial statements are prepared. When more than one measurement basis is used in the financial statements, for example when certain assets are revalued as required by statutes, it is sufficient to provide an indication of the categories of assets and liabilities to which each measurement basis is applied.
69. In deciding whether a specific accounting policy should be disclosed in the financial statements, the Director (or leader) of an enterprise considers whether disclosure would assist users in understanding the way in which transactions and events are reflected in the reported performance and financial position. The accounting policies that an enterprise might consider presenting include, but are not restricted to, the following:
(a) revenue recognition;
(b) consolidation principles, including subsidiaries and associates;
(c) business combinations;
(d) joint ventures;
(e) recognition and depreciation/amortisation of tangible and intangible assets; amortization of prepaid expense and goodwill;
(f) capitalisation of borrowing costs and other expenditure;
(g) construction contracts;
(h) investment properties;
(i) financial instruments and investments;
(k) research and development costs;
(m) taxes, including deferred taxes;
(o) foreign currency translation and hedging;
(p) definition of business and geographical segments and the basis for allocation of costs between segments;
(q) definition of cash and cash equivalents;
(r) government grants.
Other accounting standards specifically require disclosure of accounting policies in many of these areas.
70. Each enterprise considers the nature of its operations and the policies which the user would expect to be disclosed for that type of enterprise. When an enterprise has significant foreign operations or transactions in foreign currencies, disclosure of accounting policies for the recognition of foreign exchange gains and losses and the hedging of such gains and losses would be expected. In consolidated financial statements, the policy used for determining goodwill and minority interest is disclosed.
71. An accounting policy may be significant even if amounts shown for current and prior periods are not material. It is also appropriate to disclose an accounting policy for each policy not covered by existing Vietnamese Accounting Standards, but selected and applied in accordance with paragraph 12.
Presentation of changes in equity
72. An enterprise should disclose in the notes to the financial statements the information regarding changes in equity as following:
(a) the net profit or loss for the period;
(b) each item of income and expense, gain or loss which, as required by other Standards, is recognised directly in equity, and the total of these items; and
(c) the cumulative effect of changes in accounting policy and the correction of fundamental errors dealt with under the accounting treatments in Accounting Standard “Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies”.
(d) capital transactions with owners and distributions to owners;
(e) the balance of accumulated profit or loss at the beginning of the period and at the balance sheet date, and the movements for the period; and
73. An enterprise should disclose the following in the notes to the financial statements:
(a) for each class of share:
(i) the number of shares authorised;
(ii) the number of shares issued and fully paid, and issued but not fully paid;
(iii) par value per share, or that the shares have no par value;
(iv) a reconciliation of the number of shares outstanding at the beginning and at the end of the year;
(v) the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital;
(vi) shares in the enterprise held by the enterprise itself or by subsidiaries or associates of the enterprise; and
(vii) shares reserved for issuance under options and sales contracts, including the terms and amounts;
(d) the amount of any cumulative preference dividends not recognised.
An enterprise without share capital, such as a partnership, a state-owned enterprise or a limited liability company should disclose information equivalent to that required above, showing movements during the period in each category of equity interest and the rights, preferences and restrictions attaching to each category of equity interest.
74. An enterprise should disclose the following if not disclosed elsewhere in information published with the financial statements:
(a) the domicile and legal form of the enterprise, its country of incorporation and the address of the registered office (or principal place of business, if different from the registered office);
(b) a description of the nature of the enterprise’s operations and its principal activities;
(c) the name of the parent enterprise and the ultimate parent enterprise of the group; and
(d) either the number of employees at the end of the period or the average for the period.