Current Financial Reporting System Applicable to Small and Medium Enterprises in Vietnam

Main business activities in the fields of industrial production, agriculture, forestry, construction, transportation, resource exploitation, aquaculture, commercial business, catering, service and other services in culture, training, education, medical examination and treatment...

licensed by the competent authority. This reporting regime is official.

effective from 01/01/1991.

It can be seen that, at this time, the subjects of financial management were divided into two distinct groups: state-owned enterprises and non-state-owned enterprises. The concept of small and medium-sized enterprises had not yet been officially considered and applied. However, the decision

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Decree 598/TC/QD-CDKT also has a fairly wide scope of regulation, covering almost all business sectors and all types of non-state enterprises.

necessary prerequisites for the General Accounting Regime as well as the Financial Reporting Regime for Small and Medium Enterprises to be born later. According to this regime, non-state enterprises must prepare 03 accounting reports for the quarterly accounting period and the annual accounting period. Those reports are:

Balance sheet, form 01-BCKT/NQD Business results, form 02-BCKT/NQD

Inventory report of materials, products, goods, 03-BCKT/NQD

The agencies that receive these reports are the district tax authorities and the governing bodies. In addition, enterprises must also submit reports to the bank if they borrow capital from the bank.

In 1995, after 10 years of economic reform, in response to practical requirements, the unified enterprise accounting system was established under Decision No. 1141/TC/QD-CDKT dated November 1, 1995 of the Minister of Finance. The accounting system issued with this decision officially applied from January 1, 1996, including:

That is the system of vouchers, accounts, books, accounting reports, and is applied to all types of enterprises, belonging to all economic sectors (including small and medium enterprises?). This is considered a major turning point in the history of the development of the Vietnamese accounting industry, from which accounting gradually affirmed its important and indispensable role in business administration as well as economic management.

The greatest achievement that this decision brings is the unification of the accounting system for all types of enterprises, of all different types of ownership,

The Decision provides a unified method for preparing, presenting and using information on financial statements of enterprises. However, the regulation that all types of enterprises must implement the same reporting regime has also revealed many shortcomings. Non-state enterprises and small and medium-sized enterprises have encountered many difficulties when applying the accounting system and reporting system according to this Decision.

Furthermore, during this period, the number of non-state-owned units established increased according to the incentive policies of our State. In response to practical needs, on December 23, 1996, the Ministry of Finance issued Decision No. 1177/TC/QD-CDKT promulgating the Accounting Regime for Small and Medium Enterprises, officially applied from January 1, 1997. The financial reporting system of small and medium enterprises was also included in this accounting regime. However, only 3 years later, a new financial reporting regime was issued, applicable to all types of enterprises, including small and medium enterprises (Decision 167/2000/QD-BTC dated October 25, 2000 of the Minister of Finance). Many shortcomings arose in the process of implementing this new financial reporting regime. Most small and medium-sized enterprises (mostly non-state-owned) cannot fully implement the reporting system according to this regulation, causing many difficulties for the financial management of enterprises, and the inspection and control of enterprise finances by state agencies. Meanwhile, the number of small and medium-sized enterprises has grown explosively after the promulgation of the Enterprise Law 1999. This situation has posed a requirement for innovation in the financial reporting system for this type of enterprise. Decision No. 144/2001/QD-BTC dated December 21, 2001 of the Minister of Finance was issued in this context to amend and supplement the accounting regime and accounting reporting regime applicable to small and medium-sized enterprises. And since the 2002 accounting year, small and medium-sized enterprises must comply with this reporting regime, gradually ending the situation of preparing reports according to the same format and requirements as for state-owned enterprises, in order to deal with inspection agencies.

Also in the period from 2000 to present, the accounting and financial policy system of Vietnam in general has had many remarkable developments, marked by the promulgation of

The birth of Vietnamese Accounting Standards. These accounting standards gradually change the face of accounting and financial management in enterprises in Vietnam, increasingly suitable to the development of enterprises, the constant diversification of economic and financial relations in the production and business activities of enterprises.

The documents guiding the implementation of accounting standards also supplement, amend and perfect the financial reporting system of enterprises in general and the financial reporting system of small and medium enterprises in particular.

Up to now, there have been 26 Vietnamese accounting standards issued and applied, the changes that this system of standards creates for the financial reporting system are quite obvious and significant. In order to unify the accounting regime and financial reporting regime

For small and medium enterprises, avoid patchwork guidance on policies and regulations.

regulations, causing difficulties for enterprises, on September 14, 2006, the new accounting regime for small and medium enterprises was issued under Decision No. 48/2006/QD-BTC. This regime replaces the accounting and financial reporting regimes for small and medium enterprises.

issued previously, and officially put into practice in the 2007 fiscal year.

The financial reporting system under this regime is significantly improved, updating all changes and requirements of Vietnamese accounting standards.

Thus, it can be seen that the development of the accounting reporting system applied to small and medium enterprises is closely linked to the general economic development process and the development of this type of enterprise in Vietnam. The financial reporting system for small and medium enterprises was only really born in the period of comprehensive innovation in our country, linked to the process of building a market economy, the process of diversifying ownership forms, the process of attracting investment, and developing production and business in Vietnam.

2.3.1.2. Current financial reporting system applicable to enterprisesSmall and medium enterprises in Vietnam

The financial reporting system applicable to small and medium enterprises includes the following reports:

Balance sheet - form number B01-DNN

The Balance Sheet is a financial statement that summarizes the equity, liabilities, and assets of a business at a given point in time. The information on the Balance Sheet describes the financial situation of a business at a given point in time.

The contents of the Balance Sheet include the following elements: Assets, Liabilities, Owner's Equity.

According to Vietnamese Accounting Standard No. 01, these factors are specifically regulated as follows:

- Assets : Are resources controlled by a business and can gain economic benefits in the future.

The future economic benefits of an asset are the potential to increase the cash and cash equivalents of an enterprise or to reduce the cash outlays of an enterprise. The creation of future benefits of an asset is demonstrated in many different cases, such as:

+ Assets are used alone or in combination with other assets in the production of products for sale or the provision of services to customers;

+ Assets held for sale or exchange for other assets;

+ Assets used to pay liabilities;

+ Assets used for distribution to business owners

In terms of form of expression, business assets can exist in tangible or intangible form.

The assets of an enterprise are formed from past transactions or events, such as capital contributions, purchases, self-production, grants, and gifts. Transactions or events expected to arise in the future do not increase assets. Assets are created often accompanied by the process of incurring costs that bring benefits in the future, except for some special cases such as capital contributions, receiving gifts, aid, etc.

- Liabilities : Are current obligations of an enterprise arising from past transactions and events that the enterprise must pay from its resources.

Liabilities define the current obligations of a business when it receives an asset, enters into a commitment or incurs legal obligations. The settlement of current obligations can be done in many ways, such as: paying with cash or assets, or providing services, or being paid with another debt, or converting into equity...

Liabilities arise from past transactions and events, such as unpaid purchases of goods, unpaid services, loans, product warranty commitments, contractual obligations, payables to employees, taxes payable, and other payables.

- Owner's equity : Is the capital value of the enterprise, calculated as the difference between the value of the enterprise's assets minus (-) liabilities.

Owner's equity is reflected in the Balance Sheet, including: investors' capital, capital surplus, retained earnings, funds, undistributed profits, exchange rate differences and asset revaluation differences.

The sample Balance Sheet according to the current regime of small and medium enterprises is presented in Appendix No. 01 of the thesis.

Business performance report - B02-DNN

The income statement is a financial statement that reflects the profitability of a business after a certain business period. If the Balance Sheet is a report on the financial situation of a business at a point in time, the income statement shows the results of business operations after an accounting period. The basic elements of the income statement include: Revenue, Expenses, Profit or Loss. The income statement shows the relationship: Revenue - Expenses = Profit or Loss, these elements are

defined as follows:

+ Revenue and other income: Is the total value of economic benefits that an enterprise receives during the accounting period, arising from normal production, business activities and other activities of the enterprise, contributing to increasing equity, excluding capital contributions from shareholders or owners.

+ Expenses: The total value of amounts that reduce economic benefits during the accounting period in the form of cash outlays, asset deductions or debts that result in a decrease in equity, excluding distributions to shareholders.

owner or owner

Revenue, other income and expenses are presented in the Statement of Financial Performance.

business activities to provide information for assessing the ability of the enterprise to generate cash and cash equivalents in the future.

The sample business results report according to Decision No. 48/2006/QD-BTC is presented in Appendix No. 02.

Cash flow statement - B03-DNN

This report is responsible for reflecting the receipts and expenditures of money during the business period according to each type of activity: business activities, investment activities and financial activities. The cash flow report provides users with information to evaluate the effectiveness of each type of business activity, and to know how the business's money is used. Through the cash flow report, it is possible to evaluate the business's ability to generate money in the future, its ability to pay and its financial needs for future investments.

The cash flow statement must present the following cash flow information:

+ Cash flow from operating activities is the cash flow arising from the main revenue-generating activities of the enterprise and other activities that are not investment or financial activities;

+ Cash flow from investing activities is the cash flow arising from the purchase, construction, liquidation, and sale of long-term assets and other investments that are not cash equivalents;

+ Cash flow from financial activities is the cash flow arising from activities that create changes in the size and structure of the enterprise's equity and debt capital.

According to current regulations, cash flow statements can be prepared using the direct method or the indirect method. This is an optional financial statement for small and medium-sized enterprises. Cash flow statement form according to current regulations

presented in Appendix No. 03.

Financial statement notes - B09-DNN

It is a report that explains in detail the financial indicators presented in the above reports. In addition, the notes also provide some other information related to the business situation and operations of the enterprise. Notes to financial statements make financial information clearer, more transparent and easier to use for most users of accounting information.

Sample financial statement notes: see Appendix 04

In addition, when submitting financial reports to the Tax authority, small and medium enterprises must submit an additional form, the Balance Sheet - F01-DNN (Appendix No. 05).

2.3.2. Current status of financial statement inspection and analysis in small and medium enterprises in Vietnam

In order to draw conclusions about the current situation of auditing and analyzing financial statements of small and medium enterprises in Vietnam, the author conducted a survey at a number of different enterprises. The study of the current situation can be approached from many different perspectives such as: the perspective of the subject performing the analysis, the technical perspective and the analysis method... In this chapter, the thesis presents the research results on the organization and implementation of the analysis process, classified according to each subject performing the activity.

Financial statement analysis of small and medium enterprises with specific illustrative data.

The survey subjects of the thesis are small and medium enterprises operating in the fields of production, trade, and services. In addition, a number of auditing companies, banks, financial and investment consulting companies, a number of investment funds in Vietnam, etc. were also surveyed with the purpose of researching and referring to the model of auditing and analyzing financial statements in order to draw lessons for improving auditing and analyzing financial statements at small and medium enterprises.

The survey locations were mainly Hanoi and Ho Chi Minh City. The survey method was to directly interview business owners and senior personnel responsible for financial and accounting management; using multiple-choice questionnaires; and collecting data directly from participating in a number of financial statement analysis processes with the facilitation of a number of businesses.

2.3.2.1. Current status of financial reporting audit at small and medium enterprisessmall in Vietnam

Auditing financial statements during the period when the enterprise operated under a centralized planning mechanism

In the previous centralized planning economic mechanism, the number of small and medium-sized enterprises operating was not large, moreover, these enterprises were mainly owned by the state, so financial reporting inspection activities were also numerous.

different from today. During this period, most enterprises operated according to the legal and state-assigned planning targets. Therefore, the inspection was not only limited to checking financial reports but also expanded to “financial inspection”.

Inspection work is often carried out by a superior agency or a competent state agency, that is, the inspection subject is relatively separate from the business administrators. The title of chief accountant in an enterprise during this period is the title of a manager and inspector, supervising financial activities in the enterprise, separate from the title of Head of Accounting Department who is responsible for accounting work and financial reporting of the enterprise. This partly brings objectivity to the inspections, however, it is not really aimed at strengthening corporate governance. The main purpose of the inspections is to assess the situation of budget use, the situation of implementing the state-assigned planning targets, the situation of employee treatment policies, and the situation of implementing the financial obligations of the enterprise to the state. Regular inspection activities are often conducted by financial agencies, banks, and superiors, while irregular inspection activities can be conducted by the State Inspectorate or the Financial Inspectorate.

Also in this period, due to the nature of operations depending on the planning targets and state norms, the inspection method used is mainly the comparison method. Moreover, the way to apply the comparison method is also quite simple, mainly comparing the implementation targets and the planning targets or norms.

Through the above issues, it can be seen that, in this period, the financial report inspection activity or more broadly, financial inspection, has not really originated from and is not closely linked to the intrinsic needs of financial management of the enterprise. Therefore, the issues of financial report inspection from the purpose of inspection, the subject of inspection, the subject of inspection or the organization of the financial report inspection process still have many shortcomings, the financial report inspection activity is not really an effective tool for managers in financial management.

Auditing financial statements during the period when enterprises operate under market mechanisms under State management

Since our country's economy transformed from a centrally planned mechanism to a market-based mechanism with the State's macro-management and regulation, enterprises have

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