Professional Documents
Culture Documents
Financial Reporting is the way an entity or enterprise provide their financial information to the
public, who will in turn use the information to decide to support, cooperate or trade with the
enterprise. In this assignment, different users of financial statements will be discussed, as well as
the implications for the information. Similarly, the legal and regulatory influences on financial
statements as well as different accounting standards will be assessed.
Contents
Introduction...................................................................................................................1
Financial Reporting is the way an entity or enterprise provide their financial
information to the public, who will in turn use the information to decide to support,
cooperate or trade with the enterprise. In this assignment, different users of financial
statements will be discussed, as well as the implications for the information.
Similarly, the legal and regulatory influences on financial statements as well as
different accounting standards will be assessed............................................................1
1.1 Describe the different users (stakeholders) of financial statements and their
needs of VinGroup....................................................................................................3
1.2 The legal and regulatory influences on financial statements............................4
1.2.1 VAS21.....................................................................................................4
1.2.2 Company law and Stock exchange regulations.......................................5
1.3 Implications for users of Vingroup’s finacial statements:................................5
1.4 Explain how different laws/regulations are dealt with by accounting and
reporting standards....................................................................................................6
List of References.........................................................................................................8
1.1 Describe the different users (stakeholders) of financial statements and their
needs of VinGroup
The Community in general has no use of Vingroup’s financial statements, as the operations of a
company aren’t related to their financial state. A wealthy company’s facilities may damage the
environment a lot more than a small one’s, but the opposite can also be applied.
1.2 The legal and regulatory influences on financial statements
1.2.1 VAS21
Vingroup is a Vietnamese corporation and a public company. Therefore, they have to comply with
Vietnamese accounting standards in presenting their financial reports, specifically VAS21, which
has been implemented by The Ministry of Finance of Vietnam through the Auditing Policy
Department in 5 Batches, from 2001 to 2005 [ CITATION Rus14 \l 1033 ]. That’s why there
are many similarities between VAS21 and their annual reports [ CITATION Sta12 \l 1033 ].
According to VAS21 rule 05, Vingroup’s financial statements have to meet the objective of
providing information to a wide range of users about the financial situation, performance and cash
flows of their enterprise by giving details on assets, liabilities, equity, revenue, expenses… In
Vingroup’s 2012 annual report, their total assets can be seen, at roughly VND 55,825 bn, as well as
their total liabilities at estimatedly VND 44,951 bn. Similarly, their net revenue stands at VND
7,904 bn, cost of goods sold VND 4,092 bn and total owner’s equity at VND 10,874 bn. A lot more
relevant information is also provided in the report to help users in making economic decisions.
In VAS21, rule 35, financial statements are to be presented to the public at least once every year,
and similarly regulated in Vingroup’s company law about Annual financial report, information
disclosure and security, rule 46.1. Their annual report in 2011, 2012, 2013 and 2014 are accessible
from their website.
Apart from VAS21, Vingroup also has to follow Vietnam’s Law on Enterprise, issued by the
National Assembly [CITATION Law14 \l 1033 ]. In Article 9 – Obligations of enterprises,
rule 2, “To organize accounting works, to prepare and submit truthful and accurate financial
statements on time in accordance with the law on accounting” indicates that companies have to be
as fair and unbiased as possible in their reports, lest they invoke the legislations responsibilities.
Since its initial foundation as Technocom in 1993, under the watchful eye of the Government and
its rival’s business analysts, Vingroup hasn’t once been proved to be providing false or inadequate
information regarding its financial situation.
On the other hand, Vingroup is obligated to follow Vietnam’s Law on Securities, which is
applicable to Vietnamese organizations participating in investment in securities and activities on
Vietnamese stock market [CITATION Law141 \l 1033 ]. In Article 16 regarding Financial
Statements, rule 1, Vingroup’s annual reports should be containing the accounting balance sheet, a
report on results of production and business activities, a cash flow report and an explanation of the
financial statements, which they do. For instance, in the 2012 report, Vingroup’s balance sheet is
shown in pages 72 – 73, while cash flow statements are in pages 75 – 76. The explanation for those
financial statements can be found in the next 2 pages, 77 and 78. On page 112 and 113 are the
production reports. As the issuing organization is Vingroup Corporation, a parent company, all the
financial statements are consolidated, as regulated in rule 2 of the same Article.
From the mentioned information, it can be seen that Vingroup’s presentation of financial statements
has been heavily influenced by many Vietnamese regulatory frameworks, and they have follow
them closely.
1.3 Implications for users of Vingroup’s finacial statements:
There are many implications for a financial user with Vingroup as their subject. The disclosure
of information, first of all, is compulsory. As a Vietnamese public limited company listed on the
Stock market of Vietnam, Vingroup has a legal responsibility to publicize their financial
statements periodically for information users to make economic decisions accordingly. This
information provided by Vingroup has to be true and adequate, the details of which are regulated
in VAS21, Vietnam Law of Enterprise and Law of Securities. As such, the corporation’s
provision of financial situation is a large part reliable, for they will not want to violate the rules
and get penalized by the government. To a normal user, this is an advantage, as they can base on
the financial reports to get an understanding of the company’s business information, and make
their move. However, a seasoned user who has had knowledge on financial accounting and
business environment knows that the information may not always be true. As explained, an
enterprise will “try” to be as accurate and fair as possible in their financial reports. However,
some of their statements and judgements of the company’s business situation and outlook may
not be true, but rather optimistic, in order to avoid losing customers. Figures and numbers about
assets, liabilities, capitals and the likes, meanwhile, is usually more accurate, around 80%
reliable, as the government and Vingroup’s rival companies will actively try to verify it.
Nevertheless, the possibility that the inspection from the government has been compromised to
approve misleading information – usually better figures than what the company really has – is
still there, and investors should be prepared for the worst scenario in which the company did
what Bernard Madoff and his limited liability company did: providing information of growth
while the company is actually suffering loss. That’s why to mitigate risks, an information user
should have in-depth knowledge on financial reporting and the company to judge whether the
financial statements is true or not. They can also make use of financial analysts, who will try to
verify the information from the company. If the company is providing untrue information and
they are in fact deteriorating, rival companies can publicize the news and damage Vingroup’s
image and reputation, taking away Vingroup’s customers and investors as well as making it
legally liable. Their shareholders, on the other hand, may decide to cut their losses and sell all
their shares as soon as possible and let the company bankrupt. If what Vingroup provides is true,
users will use the information for purposes mentioned in 1.1
1.4 Explain how different laws/regulations are dealt with by accounting and
reporting standards.
Every government has their own way of organizing. Regarding reporting standards, Vietnam use
VAS (Vietnam Accounting Standards) which has based on IFRS (International Financial
Reporting Standards) [ CITATION Rus14 \l 1033 ].
IFRS are a set of accounting standards, issued by The International Accounting Standards Board
(IASB), which was originally formed in 1973. IASB’s principle focused on harmonization, to
reduce differences among the accounting principles used in major capital markets around the
world, and was approved by many countries. Since its foundation in 1973 until 2013, this
internation standard has been used by the EU and more than 100 other countries [ CITATION
INT14 \l 1033 ]. IFRS’s purpose, according to them, is “To develop a single set of high
quality, understandable, enforceable and globally accepted financial reportingstandards based
upon clearly articulated principles”. Its content includes 13 Standards, in which standard 10 is
about financial statements.
From a fair point of view, IFRS is much more easily applicable compared to VAS. VAS,
although based on IFRS, is still a local variant, and thus is not acceptable in other countries,
meaning that a Vietnam-orginiated multinational corporate has to use both VAS and IFRS when
making its financial reports in different countries, which is very inconvenient. Moreover, IFRS
has no obligation regarding its general form. As long as its concept, methods and presentation is
followed, entities and companies can be creative with their form of financial reports. IFRS also
has a frame of concept and high consistency compared to VAS, which is still ambigious in its
wording. In this time of Market Economy where integration is highly valued, IFRS should be
followed in order for global trading to develope.
List of References
Law on Enterprise. (2001, December 25). Đã truy lục December 19, 2014, từ
Vietnam Laws: http://www.vietnamlaws.com/
Law on Securities. (2001, December 25). Đã truy lục December 19, 2014, từ Vietnam
Laws: http://www.vietnamlaws.com/
Duc, M. (2013, May 30). Warburg Pincus Consortium to invest US$200 million in
Vincom Retail. Đã truy lục December 18, 2014, từ The Saigon Times:
http://english.thesaigontimes.vn/
KTC, R. B. (không ngày tháng). Vietnamese Accounting Standards ("VAS"). Đã truy
lục December 20, 2014, từ Russell Bedford: http://russellbedford.vn/
Thao, T. (2013, June 4). Vingroup của tỷ phú Phạm Nhật Vượng mua cổ phiếu làm
cổ phiếu quỹ. Đã truy lục December 18, 2014, từ SOHA News: http://soha.vn/
TRƯỜNG, T. (2014, February 11). Vingroup bất ngờ thay Tổng giám đốc. Đã truy
lục December 18, 2014, từ Zing.vn: http://news.zing.vn/
Vietnam GDP 1985-2014. (không ngày tháng). Đã truy lục December 18, 2014, từ
Trading Economics: http://www.tradingeconomics.com/