FINANCIAL STATEMENTS – LEGAL REGULATIONS ENTERPRISES NEED TO KNOW

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All enterprises must submit annual financial statements to competent state agencies. So what is financial statement? What is the financial statement law? Find out with OTIS LAWYERS in the article below!

Legal grounds

Law on accounting 2015

Circular 200/2014/TT-BTC

What is financial statement?

Clause 1, Article 3 of the 2015 Accounting Law defines financial statements as follows: 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.

Understandably, financial statements (FS) provide information about the financial position, business and cash flows of an enterprise. According to the law, all enterprises under the business lines must prepare and present annual FS. For companies (general corporations) with affiliated units, in addition to the annual FS, the consolidated FS at the end of the annual accounting period must be based on the financial statements of the affiliated units.

In addition, state-owned enterprises and enterprises listed on the stock market next to annual financial statements must prepare interim FS (quarterly-except for the fourth quarter).

Purpose of financial statements

According to Article 97 of Circular 200/2014/TT-BTC, FS have the following purposes:

FS 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:

- Assets;

- Liabilities;

- Owner’s equity;

- Revenue, other income, production and business costs and other expenses;

- Profit, loss and allocation of income

- 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.

Disclosure form of financial statements

Clause 1, Article 32 of the 2015 Law on Accounting stipulated:

The disclosure of FS shall be made in one or several of the following forms:

- Publication;

- Written notice;

- Posting;

- Publication on a website;

- Other manners prescribed by law.

Deadline for disclosing financial statements

Clause 2, Article 32 of the 2015 Law on Accounting stipulated:

The form and deadline for disclosing FS of accounting units using the state budget shall comply with the law on state budget. As follows:

- For state-owned enterprises:

  • Deadline for submission of quarterly FS: 20 days at the latest from the end of the quarterly accounting period. Holding companies, State corporations: 45 days at the latest. Accounting units affiliated to holding companies and State corporations shall submit financial statements to the holding company according to the deadline prescribed by the holding company.
  • Deadline for submission of annual FS: 30 days from the end of the annual accounting period. Holding companies, State corporations: 90 days at the latest. The affiliated accounting units shall submit financial statements to the holding company within the prescribed deadline.

- Accounting units that do not use the state budget, accounting units that use contributions from the People must disclose their annual financial statements within 30 days from the date of submission of FS.

- Accounting units engaged in business activities must disclose annual FS within 120 days from the end of the annual accounting period. In case the law on securities, credit and insurance has specific regulations on the form and deadline for disclosing financial statements different from those of this Law, the provisions of law on that field shall be apply.

Disclosure content of financial statements

- Accounting units using the state budget shall disclose information on state budget revenues and expenditures in accordance with the provisions of the Law on State Budget.

- Accounting units not using the state budget shall disclose the annual FS of revenues and expenditures.

- The accounting unit using the People's contributions shall disclose the purpose of mobilizing and using the contributions, the subjects of the contribution, the level of mobilization, the results of use and the finalization of the receipts and expenditures of each contribution. 

- Accounting units engaged in business activities shall disclose the following contents:

  • Status of assets, debt liabilities and owners' equity;
  • Business results;
  • Setting up and using funds;
  • Employee's income;
  • Other contents as prescribed by law.

The FS of the accounting units that are required to be audited by law must be accompanied by the audit report of the auditing organization.

Above is our consultation on FS. We hope that this will be a useful reference for readers who want to learn the legal provisions in the field of accounting - tax.

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