Fair and accurate financial reporting is the highest measure of the quality of financial information a business provides to stakeholders such as tax authorities, banks, and investors. According to Accounting Standard No. 21 (VAS 21) and... Circular 200/2014/TT-BTCPresenting data is not simply about recording numbers, but must accurately reflect the economic nature of the transactions that occur during the accounting period.
In the context of increasingly stringent tax inspections and audits, maintaining truthful and fair financial reporting helps businesses minimize legal risks and enhance their reputation in the market. This article will analyze in detail the basis for preparing reports, the responsible parties, and the strict criteria for evaluating a set of financial reports that meet the current standards of the Ministry of Finance.
On what basis should fair and reasonable financial reporting be based?
To achieve a fair and accurate financial reporting status, businesses cannot prepare reports arbitrarily but must strictly adhere to legal frameworks. According to Section 9 of Accounting Standard No. 21 (issued with Decision 234/2003/QD-BTC), fairness and accuracy are only guaranteed when reports are prepared in compliance with current accounting standards, accounting regulations, and relevant legal provisions.
Specifically, preparing accurate and fair financial statements requires businesses to perform the following tasks:
- Choosing an accounting policy: Businesses must select and apply accounting policies that are appropriate to their industry characteristics and comply with the regulations of Circular 200/2014/TT-BTC or Circular 133/2016/TT-BTC.
- Present information transparently: The chosen accounting policies must be fully disclosed in the Notes to the Financial Statements so that readers can compare and understand the true nature of the figures.
- Provide additional information: When the provisions in the standard are insufficient to clarify a particular transaction, the business has an obligation to provide additional external information to ensure that users understand the correct impact of the event on their financial situation.
| Evaluation criteria | Requirements for fair and accurate financial reporting. |
| Establishment basis | Comply with Vietnamese Accounting Standards (VAS) and the current Accounting System. |
| Consistency | Accounting policies are applied consistently across accounting periods. |
| Substance over form | Reflecting the true economic nature of things, rather than just chasing legal formalities. |
| Explanation | Clearly state that the report complies with Vietnamese accounting standards and regulations. |
Who is responsible for preparing and presenting financial statements?
The question of legal liability financial reports Honesty and fairness are always top priorities for business owners. According to Section 6 of Accounting Standard 21, the director or head of the business is the person ultimately and solely responsible for the preparation and presentation of financial statements before the law.
Although the chief accountant or accounting service unit is directly responsible for record-keeping, the legal representative must ensure that the internal control system operates effectively so that the data presented in the financial reports is truthful and fair. If discrepancies are found, the Director will have to explain them to the Tax authorities or other judicial bodies if the violations cause serious consequences.
The reporting system that requires the head's signature includes:
- Balance sheet (now the Statement of Financial Position).
- Business performance report.
- Cash flow statement.
- Explanatory notes to the financial statements.
Understanding this responsibility helps management focus more on hiring reputable consulting firms to ensure that financial reports are accurate and fair right from the initial recording stage. This helps businesses avoid unnecessary errors when preparing year-end tax returns.
Strict information requirements are necessary to achieve fair and accurate financial reporting.
According to Article 101 of Circular 200/2014/TT-BTC, financial information must meet qualitative criteria to be recognized as truthful and fair financial statements. A perfect set of reports is not only accurate in terms of addition and subtraction of numbers but must also achieve the following core quality characteristics.
Completeness, objectivity, and inaccuracy
To ensure integrity, information must include all necessary data for viewers to understand the risks and nature of the transaction. A fair and reasonable financial report must be objective, meaning it is unbiased, does not emphasize positive indicators and conceal negative ones such as bad debt or accumulated losses. Error-free means not omitting important economic phenomena.
The importance of presentation
Information is considered material if its omission or inaccuracy could alter the decisions of the report's users. When preparing fair and reasonable financial reports, accountants must assess the size and nature of each item to present it separately or grouped appropriately, avoiding misleading investors.
Verifiable and timely
Information must be provided within the stipulated timeframe (usually 30-90 days after the end of the fiscal year). Furthermore, the figures in the financial reports must be truthful and reasonable, supported by valid original documents so that auditors or tax officials can verify and cross-check them transparently during the course of their duties.
Analyze the differences between "Legal" and "Fair & Reasonable".
Many businesses mistakenly believe that simply following the invoice correctly is sufficient to produce a truthful and reasonable financial report. However, in accounting, there are cases where invoices are "correct" in form but "dishonest" in economic substance.
For example, a business purchases an asset that is actually an anonymous loan. If the accountant only records the asset increase based on the invoice without reflecting the true nature of the loan, then that report is no longer a fair and reasonable financial statement according to the materiality principle of "substance over form".
| Characteristic | Detailed description for fair and reasonable financial reporting. |
| Fit | It helps users predict the future or confirm past assessments. |
| Easy to understand | The information is categorized, specified, and presented clearly and coherently. |
| Comparable | It helps users recognize the similarities and differences between accounting periods. |
| Consistency | Use the same accounting method for similar items. |
Maintaining fair and accurate financial reporting requires close collaboration between the accounting department and corporate management in reviewing accounting estimates and making provisions for financial risks on a regular basis.
Conclude
Honest and fair financial reporting is not just a dry legal requirement, but a reflection of a company's true health. Adherence to Vietnamese accounting standards and regulations not only helps businesses avoid heavy administrative penalties from tax authorities but also opens up opportunities for transparent access to loans and investments.
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Fair and Fair Financial Reporting
If I discover errors after I've submitted the report, will it still be considered truthful?
According to accounting standards, unintentional errors can be corrected retrospectively. However, if the errors are systematic or intentionally falsify tax figures, the report is not considered a fair and reasonable financial statement. Businesses should proactively submit supplementary tax returns as soon as possible.
Do small businesses using Circular 133 need to comply with the principles of honesty and reasonableness?
Absolutely. Whether Circular 200 or Circular 133 is applied, the highest principle of accounting remains providing truthful and fair financial reports to protect the rights of stakeholders and adhere to professional ethics.
Who signs the financial statements to ensure their legal validity?
The report must bear the full signatures of the person who prepared it, the Chief Accountant, and especially the Director (who is ultimately responsible for the accuracy and fairness of the unit's financial reporting).
