Financial statements reflect a closely structured financial position and business results of an enterprise. The purpose of financial statements is to provide information about the financial position, business performance and cash flows of an enterprise, meeting the need for a large number of users in making economic decisions. For this purpose financial statements must provide information about a business about: Assets; Liabilities must pay; Equity; Revenue, other income, expenses, profits and losses; Cash flows.
This information, together with the information presented in the Notes to the Financial Statements, helps users predict future cash flows and especially the timing and degree of certainty of the generation of cash flows and amounts. cash equivalents.
The person responsible for preparing and presenting the financial statements
Management is responsible for the internal controls necessary to keep the financial statements prepared free of material misstatement, whether by mistake or fraud. They are also responsible for preventing and detecting fraud. The director (or head) of an enterprise is responsible for the preparation and presentation of financial statements.
Companies' financial statements are often audited. Audit results are reported to shareholders or capital contributors.
Requested preparation and presentation
Financial report must present honestly and fairly the financial position, situation and results of operations and cash flows of the enterprise. To ensure truthfulness and reasonableness, the financial statements must be prepared and presented on the basis of compliance with accounting standards, accounting regimes and relevant regulations in force.
Enterprises should clearly state in the notes to the financial statements that their financial statements are prepared and presented in accordance with Vietnam's accounting standards and regime. The financial statements are considered to be prepared and presented in accordance with Vietnamese accounting standards and regimes if the financial statements comply with all provisions of each applicable accounting standard and regime guiding the implementation of these standards. Vietnamese accounting of the Ministry of Finance.
In order to prepare and present an honest and reasonable financial statement, an enterprise must:
- Select and apply accounting policies in accordance with regulations;
- Present information, including accounting policies, intended to provide relevant, reliable, comparable and understandable information;
- Provide additional information when the provisions in accounting standards are not sufficient to help users understand the impact of specific transactions or events on financial performance, business performance and results of the business.
Principles of establishment and presentation
Continuous operation
When preparing and presenting the financial statements, the Director (or head) of an enterprise needs to evaluate the ability of the business to continuously operate. Financial statements must be prepared on the assumption that the business is operating continuously and will continue to do normal business in the near future, unless the enterprise intends to and is forced to cease operations, or is receivable. significantly narrow the scale of its operations. During the assessment, if the Director (or the head of the business) becomes aware of uncertainties regarding events or conditions that could cause great doubts about the business's ability to function continuously. These uncertainties need to be made clear. If the financial statements are not prepared on a continuous basis, the event should be clearly stated, along with the basis for the financial reporting and the reasons why the business is not considered to be operating continuously.
Accrual basis
Enterprises must prepare financial statements on the basis of accrual accounting, except information related to cash flows. According to accrual accounting basis, transactions and events are recorded at the time they arise, not based on the time of actual collection or payment, and are recorded in the accounting books and financial statements of the related accounting period. Expenses are recognized in the income statement on the match between revenue and expense.
Consistency
The presentation and classification of items in the financial statements must be consistent from year to year.
Materiality and aggregation
Each material item must be presented separately in the financial statements. Non-material items are not presented separately, but are gathered in those with the same nature or function. Information is considered material and the failure to present or inaccurately falsify the financial statements, affecting the economic decisions of users. .
Compensation
Liabilities and assets, and income and expenses that are material should be reported separately. Offsetting of figures in the Income Statement or Balance Sheet, except where it reflects the nature of the transaction or event, will not allow the user to understand. transactions or events performed and the business's future cash flows foreseen.
Comparable
Information in the financial statements for comparison between accounting periods must be presented in correspondence with the data in the financial statements of the previous period. Comparative information should include verbal information if this is necessary to enable users to understand the current period's financial statements.