Financial Statements: Basic Information for Businesses in 2022

Vũ Khôi

Author at Wotech Electronics Blog

What does a financial statement under Circular 200 include? Where should it be filed? These are questions many accountants care about and want to understand. Below, SimERP will point out the basic information businesses need in order to better understand financial statements.

What Are Financial Statements?

To answer the question "What does a financial statement include?": financial statements (FS) are the system of tables and figures describing a business's financial position, business performance, and cash flows.

So which reports make up the financial statements? The FS include the most comprehensive reports on the company's assets, owner's equity, liabilities, and its financial position and business results for the period. In other words, this is the medium for presenting the profitability and financial position of a business to parties such as managers, lenders, investors, tax authorities, and other relevant agencies.

Who Must Prepare Financial Statements?

Under tax authority regulations, every business across all industries and economic sectors must prepare and present annual reports. For companies or corporations with subordinate units, beyond the annual report they must also prepare consolidated or aggregated reports at the end of the fiscal accounting year based on the reports of those subordinate units.

What about state-owned companies and companies listed on the stock market? Besides annual statements, these companies must also prepare interim reports (quarterly reports — except Q4) in full form. Specifically, state-owned corporations and state enterprises with subordinate accounting units must prepare aggregated or consolidated financial statements (consolidated interim FS have been mandatory since 2008).

Purpose of Financial Statements

Financial statements provide complete information about a business's financial and operating situation. This meets the requirements of State agencies, the owner-managers, and others who use these statements to make economic decisions. A proper set of financial statements must fully provide information on:

• Owner's equity

• Liabilities

• Assets

• Profit, loss, and distribution of business results

• Revenue, other income, and production and business expenses

• Cash flows

The Significance of Financial Statements

Financial statements are extremely significant for a business's management work, as well as for parent organizations and other parties interested in the enterprise. This is demonstrated most clearly and specifically as follows:

• They are summary reports reflecting information about the asset and financial position. They also present owner's equity, liabilities, the sources of asset formation, and the company's business results for the period.

• They provide essential financial information for assessing the actual state, progress, and results of the business's production and operations during the past period. The FS support the monitoring and checking of capital usage and the ability to mobilize capital into the company's business activities.

• They play an important role in analyzing, studying, and detecting potential risks. They also inform decisions related to the management and administration of business operations or investments by owners, investors, and the company's current and future creditors.

• They are a vital basis for accurate evaluation as well as for building the company's economic-technical and financial plans. Through them, businesses improve capital efficiency and the effectiveness of their production and business activities.

What Do 2022 Financial Statements Include?

The set of financial statements submitted to State agencies includes:

– Tax finalization declarations:

• Corporate income tax (CIT) finalization declaration

• Personal income tax (PIT) finalization declaration

– A complete report set consisting of:

• The tables: balance sheet, business performance report, and cash flow statement

• Accompanying appendix: Notes to the financial statements

Financial Statement Content You Need to Know

A proper set of financial statements must provide specific information on:

• Assets

• Owner's equity and liabilities

• Revenue and other income, business expenses, and other expenses

• Profit, loss, and distribution of business results

• Taxes and other payables to the State

• Other assets related to the business

• How cash outflows and inflows circulate, shown in the company's cash flow statement

Beyond the information above, businesses must also provide the necessary details in the "Notes to the Financial Statements" to further explain the figures presented in the summary reports and the financial-accounting policies applied in recording economic transactions, such as:

• Accounting form

• Accounting regime applied

• Recognition principles

• Valuation methods and inventory accounting

• Fixed asset depreciation method

>> See more: What Are Notes to the Financial Statements? Guide to Preparing Them Correctly Under Circular 200

Principles and How to Prepare Financial Statements

To prepare financial statements under Circular 200/2014/TT-BTC standards, accountants need to build reports that meet the following principles:

• Accrual basis: The FS must be prepared on the accrual principle, except for information relating to cash flows.

• Consistency: The classification and presentation in the FS must be consistent from one fiscal year to the next — unless the nature of the business's operations has changed; or the organization wishes to change the presentation of transactions and events for a more appropriate result; or a different accounting standard requires a change in presentation.

• Going concern: The FS must be prepared on the assumption that the organization is and will continue operating in the near future — unless the business intends to scale down or cease operations.

• Materiality and aggregation: Significant items must be presented separately; immaterial amounts may be aggregated into items of similar nature or function.

• Comparability: The figures in the FS — the balance sheet, business performance report, and cash flow statement — must be presented so they can be compared across reporting periods.

• Offsetting: Assets and liabilities presented in the FS must not be offset, unless another accounting standard requires or permits offsetting. In addition, revenue, expenses, and other income may be offset when provided for in another accounting standard, or when profits/losses and related expenses arise from the same transaction/event and are not material.

To learn the steps for preparing financial statements under Circular 200, visit the article Guide to Preparing Financial Statements Under Circular 200!

Deadlines for Filing Financial Statements

The filing deadlines for businesses are as follows:

– For state-owned enterprises:

• Within 20 days for quarterly FS — counting from the end of the quarter.

• Within 30 days for annual FS — counting from the end of the fiscal year.

– For corporations and enterprises:

• Within 45 days for quarterly FS — counting from the end of the quarter.

• Within 90 days for annual FS, counting from the end of the fiscal year.

– For subordinate accounting units: submit quarterly and annual reports to the higher-level accounting unit within the deadline that unit specifies.

– Private enterprises and partnerships: file the FS within 30 days — counting from the end of the fiscal year.

– All other businesses: within 90 days from the end of the fiscal year.

Where Do Businesses Need to File Financial Statements?

– State enterprises, with quarterly and annual reporting periods, must file the FS with the following agencies:

• The finance agency

• The tax office

• The statistics office

• Parent enterprises

• The business registration authority

– Foreign-invested enterprises, with annual reporting periods, must file the FS with the following agencies:

• The finance agency

• The tax office

• The statistics office

• Parent enterprises

• The business registration authority

– All other businesses:

• The tax office

• The statistics office

• Parent enterprises

• The business registration authority

Besides the agencies above, businesses must also file the FS with the following bodies:

• State enterprises located in provinces and centrally run cities must prepare and submit reports to the provincial or municipal Department of Finance.

• State enterprises must additionally file the FS with the Ministry of Finance (Corporate Finance Department).

• For state enterprises such as commercial banks, credit institutions, insurance companies, lottery companies, and securities companies, the receiving body for financial statements is the Ministry of Finance (Banking and Finance Department or the Insurance Management and Supervision Department).

• Securities companies and public companies must file the FS with the State Securities Commission and the Stock Exchange.

• State corporations must additionally file the FS with the Ministry of Finance (General Department of Taxation).

What Happens if a Business Fails to File Financial Statements?

Under the law, in the following cases:

a) Failure to file financial statements with the competent State agencies;

b) Failure to disclose the FS as prescribed;

A fine of from 40,000,000 to 50,000,000 dong will be imposed.

Conclusion

We hope that through this article, readers have grasped the concept, purpose, and significance of financial statements as well as how to prepare them. Given that importance, many businesses in Vietnam today use accounting software to carry out these tasks as accurately, quickly, and sensibly as possible.

For more details about the SimERP accounting software, please visit the website or call our hotline to get advice from the SimERP expert team!

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