Chapter 5 Organization of accounting reporting system
5.1/ Meaning and tasks of organizing the accounting reporting system
Financial statements are used to provide information about the financial situation, business situation and cash flows of an enterprise, meeting the management requirements of business owners, state agencies and the useful needs of users in making economic decisions. Financial statements must provide information of an enterprise about:
a) Assets;
b) Liabilities;
c) Equity;
d) Revenue, other income, production and business costs and other expenses; dd) Profit, loss and division of business results;
e) Cash flows.
In addition to this information, enterprises must also provide other information in the "Notes to Financial Statements" to further explain the indicators reflected in the consolidated financial statements and the accounting policies applied to record economic transactions, prepare and present the financial statements.
Accounting reports are the final product of the accounting process.
The organization of the financial statements system must be effective in order to provide timely and accurate information to serve many users and for effective economic and financial decision making.
* Task of organizing accounting reporting system
1. Select and apply an accounting reporting system suitable to the specific characteristics of each business:
- The enterprise's accounting report consists of 2 subsystems:
+ Financial Reporting System
+ Management Accounting Reporting System.
2. Organization of preparation of accounting reports
- Financial statements must be prepared with correct content, correct method and presented consistently between accounting periods.
- Financial statements must be signed and confirmed by the preparer, chief accountant and legal representative of the enterprise.
- The content, structure and method of preparation of the international economic report depend on each unit. The international economic report is highly flexible and has no legal nature.
Period of preparation of annual financial statements: Enterprises must prepare annual financial statements according to the provisions of the Accounting Law.
Period of preparation of Interim Financial Report: Interim Financial Report includes Quarterly Financial Report (including the fourth quarter) and Semi-annual Financial Report.
Subjects of preparing annual financial statements:
The Annual Financial Reporting System is applied to all types of enterprises in all industries and economic sectors. Annual financial reports must be prepared in full form.
Subjects of preparation of Interim Financial Reports (Quarterly Financial Reports and Semi-annual Financial Reports):
a) Enterprises in which the State owns 100% of the charter capital or holds controlling shares, and units with public interests must prepare interim financial reports;
b) Other enterprises not subject to point a above are encouraged to prepare interim financial statements (but not required).
c) Interim financial statements are prepared in full or summary form. The owner of the unit decides to choose the full or summary form for the Interim Financial Statement of his unit if it does not violate the provisions of the law to which the unit is subject.
A parent enterprise with affiliated units without legal status must prepare its own financial statements and a consolidated financial statement. The consolidated financial statements are prepared on the basis of including data from all affiliated units without legal status and ensuring that all data arising from internal transactions between the parent and subordinate units, and between subordinate units with each other, are excluded.
Subordinate units without legal status must prepare their own Financial Reports in accordance with the reporting period of the superior unit to serve the consolidation of the Financial Reports of the superior unit and inspection by the State management agency.
The preparation and presentation of Financial Statements of enterprises in specialized industries must comply with the provisions of the accounting regime issued by the Ministry of Finance or approved for the industry to issue.
The preparation, presentation and publication of the annual consolidated financial statements and the interim consolidated financial statements shall comply with the provisions of law on consolidated financial statements.
The signing of Financial Statements must comply with the Law on Accounting. For units that do not prepare Financial Statements themselves but hire accounting services to prepare Financial Statements, practitioners of accounting service units must sign and clearly state the Practice Certificate Number, name and address of the Accounting Service Provider. Individual practitioners must clearly state the Practice Certificate Number.
1. Annual financial report includes:
Form No. B 01 - DN | |
- Business performance report | Form No. B 02 - DN |
- Cash flow statement | Form No. B 03 - DN |
- Notes to the Financial Statements | Form No. B 09 - DN |
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2. Interim financial report :
a) Full interim financial report, including:
Form No. B 01a – DN | |
- Mid-year business performance report | Form No. B 02a – DN |
- Interim cash flow statement | Form No. B 03a – DN |
- Selected Financial Statements Notes
b) Interim financial statements in summary form, including:
- Interim balance sheetForm No. B 01b – DN | |
- Mid-year business performance report | Form No. B 02b – DN |
- Interim cash flow statement | Form No. B 03b – DN |
- Selected Financial Statements Notes | Form No. B 09a – DN |
Requirements for information presented in Financial Statements
1. The information presented in the Financial Statements must honestly and reasonably reflect the financial situation, business situation and results of the enterprise. To ensure honesty, the information must have three characteristics: completeness, objectivity and no errors.
- Information is considered complete when it includes all the information necessary to help users of the Financial Statements understand the nature, form and risks of transactions and events. For some items, complete presentation must also describe additional information about the quality, factors and circumstances that may affect the quality and nature of the item.
- Objective presentation is unbiased in selecting or describing financial information. Objective presentation must ensure neutrality, without emphasizing, downplaying or otherwise altering the impact of financial information, whether beneficial or unfavorable to users of the Financial Statements.
- Being free from error means that there are no omissions in the description of phenomena and that there are no errors in the selection and application of the reported information. Being free from error does not mean being completely accurate in all respects, for example, estimates of unobservable prices and values are difficult to determine whether they are accurate or inaccurate. The presentation of an estimate is considered faithful if the estimated value is clearly described, the nature and limitations of the estimation process are explained and there are no errors in the selection of appropriate figures in the estimation process.
2. Financial information must be relevant to help users of Financial Statements predict, analyze and make economic decisions.
3. Financial information must be presented in all material respects. Information is material if its omission or misstatement could influence the decisions of users taken on the basis of the financial information of the reporting entity. Materiality depends on the nature and magnitude, or both, of the relevant items presented in the financial statements of a particular entity.
4. Information must be verifiable, timely and understandable.
5. Financial information must be presented consistently and comparable between accounting periods; Comparable between businesses.
3. Organize submission and publication of accounting reports
- Annual financial reports must be submitted to the competent authority within the prescribed time limit.
- - Management accounting reports are not required to be submitted to state agencies but are only used internally within the enterprise.
1. For state-owned enterprises
- a) Deadline for submitting Quarterly Financial Reports:
- - Accounting units must submit quarterly financial reports no later than 20 days from the end of the quarterly accounting period; For parent companies and State-owned corporations, no later than 45 days;
- - Accounting units under enterprises and State-owned corporations shall submit quarterly financial reports to the parent company or corporation within the time limit prescribed by the parent company or corporation.
- b) Deadline for submitting annual financial reports:
- - Accounting units must submit annual financial reports no later than 30 days from the end of the annual accounting period; For parent companies and state-owned corporations, no later than 90 days;
- Accounting units under State-owned corporations submit annual financial reports to the parent company and the corporation within the time limit prescribed by the parent company and the corporation.
- 2. For other types of businesses
- a) Accounting units that are private enterprises and partnerships must submit annual financial statements no later than 30 days from the end of the annual accounting period; for other accounting units, the deadline for submitting annual financial statements is no later than 90 days;
- b) The subordinate accounting unit shall submit the annual financial report to the superior accounting unit within the time limit prescribed by the superior accounting unit.
-
TYPES OF BUSINESSES (4)
Reporting period | Where to report | |||||
Financial Institution (1) | Tax Authority (2) | General Department list | DN grant on (3) | Business registration agency business | ||
1. State-owned enterprises | Dear, Year | x | x | x | x | x |
2. Enterprises with investment capital foreign | Year | x | x | x | x | x |
3. Other types of businesses | Year | x | x | x | x | |
1. For State-owned enterprises located in provinces and centrally run cities, they must prepare and submit Financial Reports to the Department of Finance of the province or centrally run city. For central State-owned enterprises, they must also submit Financial Reports to the Ministry of Finance (Department of Enterprise Finance).
- For types of State-owned enterprises such as: Commercial banks, lottery companies, credit institutions, insurance companies, securities trading companies must submit Financial Reports to the Ministry of Finance (Department of Banking and Finance or Department of Insurance Supervision and Management).
- Securities trading companies and public companies must submit Financial Reports to the State Securities Commission and the Stock Exchange.
2. Enterprises must submit Financial Reports to the tax authority directly managing local taxes. State-owned corporations must also submit Financial Reports to the Ministry of Finance (General Department of Taxation).
3. Enterprises with superior accounting units must submit Financial Reports to the superior accounting units according to the regulations of the superior accounting units.
4. For enterprises that are required by law to have their financial statements audited, they must be audited before submitting their financial statements as prescribed. Financial statements of enterprises that have been audited must attach the audit report to the financial statements when submitting them to state management agencies and superior enterprises.
5. The financial authority to which foreign direct investment (FDI) enterprises must submit financial reports is the Department of Finance of the province or centrally-run city where the enterprise registers its main business headquarters.
6. For enterprises with 100% charter capital owned by the State, in addition to the agencies where the enterprise must submit Financial Reports as prescribed above, the enterprise must also submit Financial Reports to agencies and organizations assigned and decentralized to exercise the rights of the owner according to Decree No. 99/2012/ND-CP and its amendments, supplements and replacements.
7. Enterprises (including domestic enterprises and foreign-invested enterprises) headquartered in export processing zones, industrial parks, and high-tech zones must also submit annual financial reports to the Management Board of export processing zones, industrial parks, and high-tech zones if requested.
5.2/ Organizing the management accounting reporting system
* Organization content:
- Content of design of KTQT reporting system
- Types of management accounting reports
- Method of preparing some international economic reports
* Content of KTQT reporting system design
- Based on management requirements to build a system of indicators on management accounting reports.
- Build the form and structure of the report
- Encode the indicators on the Financial Report to unify the language of data and information on each report.
* - Types of management accounting reports
- Cost report
- Business results report
- Sales cost report
- Business management cost report
- Fixed assets report
- Capital report
5.3/ Organizing the financial accounting reporting system
Purpose of the Balance Sheet
The Balance Sheet is a consolidated financial report that reflects the total value of the existing assets and the sources of those assets of the enterprise at a certain point in time. The data on the Balance Sheet shows the total value of the existing assets of the enterprise according to the structure of the assets and the structure of the capital sources that form those assets. Based on the Balance Sheet, it is possible to comment on and evaluate the general financial situation of the enterprise.
Principles of preparing and presenting the Balance Sheet
According to the provisions of the Accounting Standard “Presentation of Financial Statements”, when preparing and presenting the Balance Sheet, the general principles of preparing and presenting the Financial Statements must be followed. In addition, on the Balance Sheet, the Assets and Liabilities items must be presented separately as short-term and long-term, depending on the duration of the normal business cycle of the enterprise, specifically as follows:
a) For enterprises with a normal business cycle of 12 months, Assets and Liabilities are divided into short-term and long-term according to the following principles:
- Assets and liabilities that are expected to be recovered or paid within no more than 12 months from the reporting date are classified as short-term;
- Assets and liabilities that are recovered or paid after 12 months or more from the reporting date are classified as long-term.
b) For enterprises with a normal business cycle longer than 12 months, Assets and Liabilities are divided into short-term and long-term according to the following conditions:
- Assets and liabilities that are recovered or paid within a normal operating cycle are classified as current;
- Assets and liabilities that are expected to be recovered or paid over a period longer than one normal operating cycle are classified as long-term.
In this case, the enterprise must clearly explain the characteristics that determine the normal business cycle, the average time of the normal business cycle, and evidence of the production and business cycle of the enterprise as well as the industry and field in which the enterprise operates.
c) For businesses that, due to the nature of their operations, cannot rely on the business cycle to distinguish between short-term and long-term, Assets and Liabilities are presented in order of decreasing liquidity.
When preparing the consolidated balance sheet between the superior units and the subordinate units without legal status, the superior unit must eliminate all balances.
of items arising from internal transactions, such as receivables, payables, internal loans... between the parent unit and the subordinate unit, and between subordinate units.
The technique of excluding internal items when consolidating reports between the superior and subordinate accounting units is performed similarly to the technique of consolidating financial statements.
Indicators without figures are exempted from presentation on the Balance Sheet. Enterprises proactively renumber the indicators according to the principle of continuity in each section.
.Basis for preparing the Balance Sheet
- Based on the general ledger;
- Based on detailed accounting books, cards or detailed summary tables;
- Based on the previous year's Balance Sheet (to present the beginning of the year column).
Content and method of preparing indicators in the Balance Sheet of an enterprise that meet the going concern assumption (Form B01-DN)
a) Current assets (Code 100)
Current assets reflect the total value of cash, cash equivalents and other short-term assets that can be converted into cash, sold or used within no more than 12 months or a normal business cycle of the enterprise at the time of reporting, including: Cash, cash equivalents, short-term financial investments, short-term receivables, inventories and other short-term assets.
Code 100 = Code 110 + Code 120 + Code 130 + Code 140 + Code 150.
- Cash and cash equivalents (Code 110)
Is a synthetic indicator reflecting the total amount of cash and cash equivalents currently available to the enterprise at the reporting time, including: Cash in funds, bank deposits (no term), money in transit and cash equivalents of the enterprise. Code 110 = Code 111 + Code 112.
+ Money (Code 111)
This indicator reflects the total amount of money available to the enterprise at the time of reporting, including: Cash in the enterprise's fund, non-term bank deposits and money in transit. The data to be recorded in the "Cash" indicator is the total debit balance of Accounts 111 "Cash", 112 "Bank deposits" and 113 "Cash in transit".
+ Cash equivalents (Code 112)
This indicator reflects short-term investments with a recovery period of no more than 3 months from the investment date that can be easily converted into a certain amount of cash and are not subject to risk of conversion into cash at the reporting time.
The data to be recorded in this indicator is mainly based on the detailed debit balance of account 1281 "Term deposits" (details of term deposits with original terms of no more than 3 months) and account 1288 "Other investments held to maturity" (details of amounts that qualify for classification as cash equivalents). In addition, during the reporting process, if it is found that the amounts reflected in other accounts satisfy the definition of cash equivalents, the accountant is allowed to present them in this indicator. Cash equivalents
Money can include: Bank bills, treasury bills, bank deposits with original terms of no more than 3 months...
Amounts previously classified as cash equivalents but overdue and not yet recovered must be presented in other indicators, in accordance with the content of each item.
When analyzing financial indicators, in addition to the cash equivalents presented in this indicator, accountants can consider cash equivalents to include amounts with a remaining recovery period of less than 3 months from the reporting date (but with an original maturity of more than 3 months) that can be easily converted into a certain amount of cash and have no risk in converting into cash.
- Short-term financial investments (Code 120)
Is a synthetic indicator reflecting the total value of short-term investments (after deducting the provision for devaluation of trading securities), including: Securities held for business purposes, investments held to maturity and other investments with remaining terms not exceeding 12 months from the reporting date.
Short-term investments reflected in this indicator do not include short-term investments presented in the indicators "Cash equivalents" and "Short-term loan receivables".
Code 120 = Code 121 + Code 122 + Code 123.
+ Trading securities (Code 121)
This indicator reflects the value of securities and other financial instruments held for trading purposes at the reporting time (held for the purpose of waiting for price increase to sell for profit). This indicator may include financial instruments that are not securitized, such as commercial paper, forward contracts, swap contracts, etc. held for trading purposes. The data to be recorded in this indicator is the debit balance of account 121
– “Trading securities”.
+ Provision for devaluation of trading securities (Code 122)
This indicator reflects the provision for devaluation of trading securities at the reporting time. The data to be recorded in this indicator is the credit balance of Account 2291 "Provision for devaluation of trading securities" and is recorded in negative numbers in the form of parentheses (...).
+ Investment held to maturity (Code 123)
This indicator reflects investments held to maturity with remaining terms of no more than 12 months from the reporting date, such as term deposits, bonds, commercial papers and other types of debt securities. This indicator does not include investments held to maturity presented in the indicators "Cash equivalents" and "Short-term loan receivables". The data to be recorded in this indicator is the debit balance of accounts 1281, 1282, 1288 (details of amounts with remaining terms of no more than 12 months and not classified as cash equivalents).
- Short-term receivables (Code 130)
Is a synthetic indicator reflecting the total value of short-term receivables with a remaining collection period of no more than 12 months or within a normal business cycle at the reporting time (after deducting the provision for short-term doubtful receivables), such as: