What Are Financial Statement Notes? A Guide to Preparing Them Under Circular 200

Vu Khoi

Author at Wotech Electronics Blog

Financial statement notes are an indispensable part of a company's financial report. While the financial report, balance sheet, or income statement provides key information about the financial situation, the notes to the financial statements (FS notes) explain and supply the information that helps investors better understand the company's finances. Accountants need to understand how to prepare the notes, comply with accounting principles, and present the report clearly and systematically.

What are financial statement notes?

Financial statement notes are an inseparable component when preparing a company's financial report, providing detailed explanations or supplying information missing from the report. Typically, the notes contain information related to the company's characteristics, accounting methods, the currency unit used in accounting, the accounting policies applied, and any other information the company deems necessary for explaining the financial report. Although this information is important for management decision-making, it is usually not placed directly in the financial statements but disclosed in the notes when needed, to avoid confusing the reader.

Guide to preparing financial statement notes

Principles and basis for preparing financial statement notes

Financial statement notes must be presented in accordance with the accounting standards in Circulars 133 and 200 of the Ministry of Finance. Circular 200 applies to all types of businesses, all economic sectors, in every field. Circular 133, however, applies only to small and medium-sized enterprises. Accordingly, SMEs may choose one of the two note templates, but must ensure consistency within the same fiscal year.

To prepare the FS notes, the business needs to base them on its actual business situation, the balance sheet, the cash flow statement, the general accounting ledger, the detailed accounting ledgers, the previous year's financial report, and related documents.

Contents of the financial statement notes

In general, the financial statement notes of every type of business must cover 6 main contents: the characteristics of the business's operations; the accounting period and currency unit used in accounting; the accounting policies applied; supplementary information for the corporate financial report; and other information. However, the specific content within each section will vary by business. For example, the FS notes of an LLC will have an ownership form and corporate structure different from those of a state-owned company. Businesses can refer to the template below to ensure they provide all 6 required contents in the standard format.

• Characteristics of the business's operations: In this section, the business clearly states its ownership form (state-owned company, LLC, or private enterprise), its field and lines of business, its production and business cycle, the characteristics of its operations, and its corporate structure (a list of subsidiaries and affiliated units).

• Accounting period and currency unit used in accounting: The business states clearly that the accounting period follows the calendar year and specifies the currency unit used.

• Accounting standards and regime applied: The business states which corporate accounting regime it applies and whether the report complies with Vietnamese accounting regulations and standards. Where accounting standards are not applied, the business must clearly state so in the financial statement notes.

• Accounting policies applied: The business presents the accounting principles used in the report, such as the types of exchange rates used in accounting, the principles for determining effective interest rates, the principles for recognizing cash amounts, the accounting principles for investments, and so on.

• Supplementary information for the corporate financial report: In this section, the business must analyze the detailed figures for the line items in the Balance Sheet, the Income Statement, and the Cash Flow Statement. The business must ensure the figures are correctly traced from the corporate financial report and presented in a way that makes them easy to compare across periods.

• Other information: The business presents other important information beyond what has been presented in the sections above. The business should provide suitable information forms to make it easy for readers to compare and cross-check.

Where information must be provided to foreign investors, the business needs to translate and provide the English-language financial statement notes as required. The English-language notes essentially still contain the main contents covered in the sample statement notes.

Guide to submitting the financial statement notes

Step 1: Visit thuedientu.gdt.gov.vn and log into the system, where the username is the company's tax identification number (MST).

Step 2: Look up the financial report declaration already submitted by going to the "Tra cứu" (Lookup) section, select the financial report under "Tờ khai" (Declarations), then click "Tra cứu" (Lookup).

Step 3: Once the results are displayed, click the "Gửi phụ lục" (Send Appendix) column to upload the financial statement notes.

Step 4: After selecting the appendix, the system will request an electronic signature. During the e-signing process, the business must enter the Token's PIN code.

Note: the FS notes must be exported in Excel or Word format.

Software supporting the preparation of financial statement notes

Preparing the financial statement notes requires accurate information about the company's financial situation as well as figures from previous years' reports. Businesses therefore need a reliable information management system to minimize errors during report preparation.

The SimERP system provides accounting tools and software that reduce errors during calculations and data entry. Moreover, with SimERP, all information is stored on the system. The report preparer can easily access information from the Balance Sheet, the Income Statement, the Cash Flow Statement, and related documents from previous years. Information exchange also becomes easier with SimERP.

Conclusion

Financial statement notes must strictly comply with accounting regulations. In essence, a business needs to provide complete information on the characteristics of its operations, the accounting period and currency unit used in accounting, the accounting standards applied, the accounting policies applied, and supplementary information for the corporate financial report. Submitting the FS notes is done through the e-tax portal and takes place after the financial report. We hope that through this article, readers have grasped the basic information about FS notes.

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