On the other hand, because the Vietnamese accounting standards system was issued later and is based on the spirit of international accounting standards, the Vietnamese accounting standards system is quite complete and highly harmonized with the international accounting standards system. The process of consolidating financial statements according to the provisions of VAS 25 generally complies with the provisions of IAS 27 (International Accounting Standard No. 27 - Consolidated Financial Statements) and IFRS 3 (International Financial Reporting Standards - Business Consolidation). The consolidation process is quite clear, the accounting methods used for consolidation follow the new trends of IAS (International Accounting Standards).
b, On the preparation of consolidated financial statements at the Corporations.
From the study of the preparation of consolidated financial statements at VIWASEEN Water Supply, Drainage and Environment Construction Investment Corporation, we can see that depending on each Group, the method of preparing consolidated financial statements may be different (consolidation at each level or direct consolidation), but basically, the Groups have met the requirements on the content and form of consolidated financial statements:
The content of the financial statements of the Corporation (Group) has reflected the financial situation and operating capacity of the unit in that accounting year, and has partly complied with the provisions and instructions of Circular 161/2007/TT-BTC. The Corporations have fully implemented the steps guided by the Ministry of Finance, eliminated internal transactions of the Group, separated the interests of minority shareholders... from the interests of the Group, thereby making the consolidated financial statements more realistically reflect the financial situation of the Group.
Regarding form: If from 2006 and before, financial statements in general and consolidated financial statements in particular usually only included 2 types of reports: Consolidated balance sheet and Consolidated income statement, now the Consolidated financial statements of the Corporations have been implemented in accordance with the regulations and instructions of the Ministry of Finance. Each consolidated financial statement always includes 4 types:
+ Consolidated balance sheet - Form B01-DN/HN
+ Consolidated business results report – Form B02-DN/HN
+ Consolidated cash flow statement - Form B03-DN/HN
+ Notes to consolidated financial statements – Form B04-DN/HN
In which, the account coding and presentation are in accordance with the instructions of accounting standard No. 21 "Presentation of financial statements" and related standards and guiding circulars.
2.1.2.2 Existence
a, On the system of accounting standards documents and guidance on accounting standards documents in Vietnam.
- In recent years, the system of accounting standards and guiding circulars related to the preparation and presentation of consolidated financial statements has been increasingly improved and specified. This makes it easier for the Group to prepare consolidated financial statements, but these accounting standards and guiding circulars are not yet concentrated, scattered in many standards and many guiding circulars. This also causes some difficulties for the Groups in researching and applying the standards.
- Regarding the time of preparing consolidated financial statements, VAS 25 only mentions that consolidated financial statements must comply with VAS 21 - Presentation of financial statements and other regulations, but does not stipulate the time of preparing consolidated financial statements. Circular No. 23/2003/TT-BTC stipulates that consolidated financial statements must be prepared and submitted to State management agencies at the end of the fiscal year accounting period, no later than 90 days from the end of the fiscal year accounting period. VAS 11 and Circular 21/2006/TT-BTC stipulate that the buyer, which is the parent company, does not have to prepare consolidated financial statements at the date of purchase but must prepare them at the earliest time according to current regulations. Up to now, there is no legal document specifically regulating the earliest time. Countries with developed economies stipulate that at the time the parent company's control over the subsidiary is established, the parent company must prepare consolidated financial statements and the following accounting years must still prepare consolidated financial statements.
- The indicator "Commercial advantage" on the consolidated financial statements does not reflect
reflects the business advantage of the whole Group. This comes from calculating business advantage based on adding up the advantages of each company, without offsetting to calculate the commercial advantage of the whole Group, therefore, commercial advantage is always determined to be higher than the actual value.
Vietnamese accounting standards do not provide uniform regulations on the treatment of negative goodwill. According to the example of preparing consolidated financial statements and the example of determining profits or losses in joint ventures and associates of VAS25 and Circular 23/2005/TT-BTC, if there is a commercial goodwill (both negative and positive), it will be allocated annually. However, according to Circular 21/2006/TT-BTC, if there is a positive commercial goodwill, it will be allocated annually, but if there is a negative commercial goodwill, it will be recorded in Other Income or Other Expenses after review. Therefore, it is necessary to stipulate the method of determining commercial goodwill as well as the method of amortizing commercial goodwill specifically and consistently between documents.
Besides, although according to VAS11, the maximum depreciation period for positive goodwill is 10 years, in the illustrative example in Circular 23/2005/TT-BTC on goodwill arising from investment in associated companies, the depreciation period is 20 years.
- The guiding circular does not cover all practical situations, such as the case where subsidiaries invest in each other, creating a circular investment method. This is also a case that needs to be excluded in the consolidated financial statements. However, VAS 25 - "Consolidated financial statements and accounting for investments in subsidiaries" and Circular 23 only stipulate the exclusion of the book value of the parent company's investment in the subsidiary and the ownership portion in the subsidiary's equity. Therefore, this mutual investment has not been excluded from the consolidated financial statements.
Or the case of reverse investment (subsidiary invests in parent company). Because in essence, in the investment relationship with parent company, within the scope of not changing the control relationship between parent company and subsidiary. When parent company has the need to mobilize capital from outside or parent company establishes a financial institution to mobilize capital, it cannot prevent the investment of subsidiary in the opposite direction. However,
The current legal framework for consolidated financial statements does not meet the requirements of a Group model at a complex level such as the multi-dimensional investment case mentioned above. Furthermore, VAS 25 and the guiding circular have not yet specifically addressed this issue.
- From January 2009, FAS 160 (appendix of ARB 51) issued by FASB officially took effect. In order to improve the reasonableness, comparability, etc. of information in consolidated financial statements, FASB has made amendments to "minority shareholder interests". Previously, in the consolidated balance sheet, minority shareholder interests were placed between Liabilities and Owners' Equity or were placed in Owners' Equity but were not considered a component of Owners' Equity, Vietnamese accounting standards also stipulate the same. According to the new regulations of FAS 160, "Minority shareholder interests" will be in the Owners' Equity item and reported as a part of Owners' Equity.
Therefore, this new regulation also leads to a change in the nature and presentation of the consolidated income statement. The figures in the consolidated income statement are calculated by adding up the corresponding items in the income statement of the parent company and its subsidiaries after adjustment. Before FAS 160 was issued, minority interests in the income statement were considered as expenses or deductions from the Group's profit after tax, and the Group's net profit did not include minority interests. Now, the Group's net profit will include minority interests.
To be more consistent with international standards when there are changes, Vietnamese accounting standards also need to be adjusted as soon as possible, because this change not only affects the preparation of consolidated financial statements but also affects the indicators in the analysis of consolidated financial statements.
- According to current regulations on Consolidated Financial Statements, interested parties will see that these are mostly regulations for preparing Consolidated Balance Sheets, Consolidated Income Statements without other Financial Statements (because according to regulations, the Consolidated Financial Statement system must include 04 reporting forms), especially specific instructions on preparing Consolidated Cash Flow Statements, which play a very important role in analyzing the feasibility of the financial statements.
the Group's cash generation capacity. That is why many Groups today prepare consolidated cash flow statements simply by adding up each indicator in the financial statements of the parent company and its subsidiaries, typically seen in the way the consolidated cash flow statement of VIWASEEN Corporation is prepared above.
2.1.2.2.2 On the preparation of consolidated financial statements at Corporations
- Preparing consolidated financial statements is an extremely difficult and complicated task. The Group must adjust indicators, eliminate internal transactions, separate the interests of minority shareholders, etc. so that the consolidated financial statements most accurately reflect the financial situation of the entire Group, including many companies as one entity.
Although in the recent past, the Corporations have made efforts to prepare Consolidated Financial Statements in accordance with the provisions of Accounting Standard 25 and guiding circulars, the techniques for preparing Consolidated Financial Statements in the Corporations are still incomplete and do not comply with the regulations of the Ministry of Finance such as the issue of setting up reserve funds, excluding internal transactions, the time of preparing Consolidated Financial Statements, etc.
Typically, many corporations and general companies have not completely eliminated internal transactions, so the audit results and the results calculated by the company often have differences. This can be seen in the preparation of the consolidated financial statements of VIWASEEN General Company above, the General Company did not eliminate unrealized profits and losses, thus also leading to not adjusting the indicators of pre-tax and post-tax profits, income tax expenses, deferred income tax assets, etc. Or in the recent audit period of 2008, a series of parent-subsidiary companies had differences between the audit results and the results calculated by the company due to not fully eliminating internal transactions: Truong Thanh Wood Industry Corporation after auditing, the total assets decreased by 27,672,989,155 VND, of which 20,100,768,000 VND was due to
reduce short-term investments which are essentially internal short-term loans 3. Joint stock companies
If Hoang Anh Gia Lai completely excludes internal transactions, the Group's revenue will decrease by more than VND 239 billion, leading to consolidated profit and equity together.
3 http://www.hsx.vn/hsx/Modules/News/NewsDetail.aspx?id=27059
decreased by more than 121 billion VND, basic earnings per share decreased by 673 VND, from 3,657 VND/share to 2,984 VND/share 4 .... Or like SAVICO Joint Stock Company, after auditing, sales and service revenue decreased by 90,348,442,823 VND, equivalent to 4%, mainly due to excluding internal sales revenue at subsidiaries 5 .
In addition, similar to the financial statements of ordinary enterprises, the reason for the difference between the audited consolidated financial statements and the preliminary results calculated by the company is mainly due to the incomplete provisioning of financial investment provisions. STB has a difference of VND 114 billion (-12%), according to STB's explanation, due to the difference in the method of setting aside provisions for depreciation on unlisted shares of the Bank compared to the method given by the auditing company. ABT has a difference of 84%, the reason explained by the company is due to the additional provisioning for depreciation on long-term financial investments of VND 21.1 billion.
Table 14: Some enterprises with profit after tax difference in 2008
Stock code
Audited net profit (Billion VND) | Unaudited net profit (Billion VND) | Difference | ||
Billion VND | % | |||
STB | 954.8 | 1,069.1 | -114.4 | -12.0 |
ABT | 22.6 | 41.6 | -18.9 | -84.0 |
CII | 132.8 | 147.3 | -14.5 | -10.9 |
TDH | 212.0 | 199.1 | 12.9 | 6.1 |
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- Similar to regular financial reports, because consolidated interim financial reports and quarterly reports are not mandatory and do not require auditing, many listed companies that want their company's stock prices to be high have taken advantage of this feature to inflate the business results of the group of companies, creating a lack of transparency in the published information and causing a loss of confidence among investors.
Moreover, the content of these reports is quite sketchy. Many businesses and corporations only provide two pages of balance sheet and income statement.
4 http://cafef.vn/2008121112060376CA36/hagl-loi-nhuan-sau-thue-9-thang-dat-70875-ty-dong.chn
5 http://www.ssc.gov.vn/
The entries are brief, and are rarely accompanied by the explanatory notes required by the interim financial reporting standards of VAS 27.
Another important issue is that most enterprises have not consolidated their quarterly financial statements. Most enterprises publish their own quarterly financial statements of the parent company (while the profits and losses of the subsidiaries are not shown). Some publish the parent company's financial statements together with the financial statements of some subsidiaries instead of the consolidated financial statements of the whole Group. This causes information chaos for investors, especially investors who do not have in-depth knowledge of accounting and finance. These enterprises have left the task of "consolidating" the Group's financial statements to investors.
- Consolidated financial statements require the parent company and its subsidiaries to have a consensus on the accounting method for each transaction. In reality, member companies cannot fully agree with the parent company on the accounting method for each transaction. This is due to the fact that the financial statements of member units and dependent units are prepared using different accounting software, and if adjustments are made to reach a consensus, it will be very costly. Therefore, currently, the consolidated financial statements of parent and subsidiary companies are not yet fully consistent in the accounting methods for each transaction as prescribed by VAS 25 - Consolidated financial statements and accounting for investments in subsidiaries. Consolidation in such a condition of inconsistent accounting policies will result in inaccurate data reflection, failing to honestly represent the financial status of the Group.
- The financial reports are still flawed, dishonest, formal and perfunctory, the financial reports are not reliable, are not a management tool, and are not really the basis for investors to properly assess the financial status of the Group and make investment decisions. While the relationship between the parent company and its subsidiaries in the world's economic groups is a capital relationship, the parent company controls its subsidiaries, the financial reports of any parent company or subsidiary are the basis, the important basis in the investment decisions of investors. However, financial reports in Vietnam still have
heavy "defensive mentality" towards state management agencies, tax authorities, police, market management. Enterprises have sought to edit indicators in consolidated financial statements for the purposes of reducing taxes payable, improving business results, reducing losses to maintain stock prices (especially in 2008, due to the strong and prolonged decline in the stock market, many securities trading enterprises suffered losses). The transparency of consolidated financial statements is distorted, shareholders are not fully informed about the value and profitability of enterprises.
2.2 Consolidated financial statement analysis in Vietnam
2.2.1 Research on the analysis of consolidated financial statements in 2007 at FPT Corporation
At the end of the fiscal year and the financial reports have been completed, FPT Corporation analyzes the financial situation through the financial reporting system with the main contents: analysis of financial structure and capital security for business operations, analysis of debt situation and payment ability, analysis of business efficiency.
The main method used by FPT Corporation to analyze financial statements is the comparative method, including both horizontal comparison (comparing the same indicator between periods) and vertical comparison (comparing indicators on financial statements with each other).
2.2.1.1 Analysis of scale, financial structure and capital security situation for business operations
2.2.1.1.1 Analysis of asset size and structure
a, Analysis of asset structure scale
The source of documents used to evaluate the scale and financial structure of the Group is the Consolidated Balance Sheet of the Group in 2006 and 2007.