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LEGAL REGULATIONS ON FINANCIAL REPORTING
Financial statements play an important role in providing information about the financial position, business operations, and cash flow of the business. According to the law, all enterprises of all sectors and economic sectors are required to summarize and present annual financial statements. For corporations or corporations with subordinate units, in addition to making annual financial statements, they must also compile consolidated financial statements (also known as consolidated financial statements) at the end of the annual accounting period, based on the financial statements of each subsidiary. So what are financial statements? Current regulations on financial reporting. Let’s find out with Siglaw Law Firm through the article below!
Financial statements are an economic and financial information system of an accounting entity, presented according to the prescribed form in accounting standards and accounting regulations. Simply put, financial statements are a combination of information about the financial situation of an organization or enterprise, including: financial position, operations, and cash flows, balance sheet, cash flow statement, income statement, and accompanying notes.
Classification of financial statements based on the establishment and presentation of the content reflects two types of financial statements:
- Consolidated financial statements: Summarize the entire financial and business situation of an enterprise, including both the parent company and subsidiary companies within the same ecosystem, including affiliated companies.
- Separate financial statements: Represent the financial and business situation of a single enterprise.
Classifying financial statements based on the time of reporting, there will be two types:
- Annual financial statements: These are prepared and calculated based on the number of calendar years or annual accounting periods, ensuring a full 12 months after notification from the tax authorities. Enterprises are allowed to switch between the old and new financial years.
- Interim financial statements: These reports are prepared for the four quarters of the financial year along with semi-annual financial statements. This type of report is constructed according to a specific template in summary form but ensuring completeness. For state-owned enterprises or listed companies, it is mandatory to prepare interim financial statements, while for other types of enterprises, it is not required.
Purpose of financial statements
– Financial statements aim to provide information on the financial situation, business, and cash flow of enterprises, meeting the management requirements of business owners, State agencies as well as useful needs of users in making economic decisions. Financial statements must also provide information on assets, liabilities, equity, revenue, production and business expenses, profit-loss, division of business results,…
– Provide other relevant information in the “Notes to the Financial Statements” to explain more about the indicators reflected on the consolidated financial statements, accounting policies applied to record arising economic operations, prepare and present financial statements. To ensure that the business complies with the law and is financially transparent.
Financial statements not only provide a comprehensive view of the business but also support management decisions, evaluate performance, and are tools to support financial management and risk management in the business. Besides, financial statements help businesses save time, reduce the overall burden associated with the annual tax payment process.
Provisions of law on financial reporting
Entities required to prepare financial statements according to legal regulations
The current annual financial reporting system is applied to all types of enterprises across various industries and economic sectors. Annual financial statements must be prepared in full format. Additionally, state-owned enterprises and companies listed on the stock market, besides preparing annual financial statements, must also prepare interim financial statements (quarterly financial statements and semi-annual financial statements). Specifically, entities required to prepare interim financial statements include the following:
(1) Enterprises fully owned by the State or holding controlling shares, as well as entities with public interests, are required to prepare interim financial statements.
(2) Other enterprises not subject to the above are encouraged to prepare mid-year financial statements (but are not mandatory).
Entity owners can choose between the full or summary format for the Mid-Year Financial Statements. However, this choice must comply with legal regulations and the entities subject to regulation.
For superior-level enterprises with subordinate units that lack legal personality, separate financial statements for each unit and consolidated financial statements must be prepared. Consolidated financial statements are prepared based on including the data of all subordinate units lacking legal personality, ensuring the exclusion of all data arising from internal transactions between the superior and subordinate units, and among the subordinate units themselves.
Subordinate units without legal personality must prepare their financial statements in accordance with the reporting period of the superior unit to facilitate the consolidation of the superior unit’s financial statements and inspection by the state management authorities.
Note:
+ For enterprises in specific industries, the preparation and presentation of financial statements of enterprises need to comply with the provisions of the accounting regime of the Ministry of Finance issued or approved for the issuing industry.
+ The preparation, presentation and disclosure of annual consolidated financial statements and mid-year consolidated financial statements shall comply with the provisions of law on consolidated financial statements.
+ The signing of financial statements must comply with the Accounting Law. For an entity that does not prepare its own financial statements but hires accounting services to prepare financial statements, practitioners belonging to accounting service units must sign and clearly state the practice certificate number, name and address of the accounting service provider. The individual practitioner must specify the Practice Certificate Number.
Time limit for submitting financial statements
| For state-owned enterprises | For other businesses | |
| Deadline for submitting annual financial statements | + Time limit for submitting annual financial statements: At least 30 days from the end of the annual accounting period. Parent companies, State corporations: No later than 90 days. Affiliated accounting units will submit financial statements to the parent company within the prescribed time limit.
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+ Private enterprises and partnerships must submit annual financial statements no later than 30 days from the end of the annual accounting period. Other accounting units are no later than 90 days.
+ The affiliated accounting unit shall submit annual financial statements to the superior accounting unit according to the prescribed time limit. |
| Deadline for submitting quarterly financial statements | + Time limit for submitting quarterly financial statements: At least 20 days from the end of the quarterly accounting period. Parent companies, State corporations: no later than 45 days. Accounting units affiliated to enterprises and State corporations will submit financial statements to the parent company according to the time limit prescribed by the parent company. |
Above is some basic information about the Legal Regulations on financial statements. If you have any questions about the Financial Reporting service, you can contact Siglaw Law Firm directly for assistance!
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