Accounting for Small and Medium Enterprises ("SME") under VN GAAP

SMEs are a dominant segment of the private sector, accounting for 80% of total enterprises operating in Vietnam. The accounting regime for SME in Vietnam is subject to SME “ownership” rather than size, therefore the Decision 48/2006/QD-BTC, September 14, 2006 is limited to the following institutions:

  • Limited liability companies
  • Joint stock companies (excluding listed ones)
  • Partnerships
  • Sole proprietorships,
  • Cooperatives (except those in agriculture and banking field)

In case the above institutions are big in size, they are subject to application of accounting regime regulated in Decision 15/2006/QD-BTC March 20, 2006. However, an official notification to the tax authority must be implemented.

With the fact that SME's financial statements are only used by taxation authorities and lenders and the public interest is limited, therefore the accounting regime (Decision 48) for this sector tends to be simplified from the accounting regime (Decision 15) for business enterprises (i.e. SOE, FIE and listed companies).

This is quite common in many countries in which allowing accounting rules exemption is applied for SME. Vietnam is not an exception in which seven VASs are fully applied, twelve are partially adopted and other seven are not applicable.

Full VAS application

 

1

VAS 01 - Framework

2

VAS 05 – Investment property

3

VAS 14 – Revenue and other income

4

VAS 16 – Borrowing costs

5

VAS 18 – Provisions. Contingent assets and contingent liabilities

6

VAS 23 – Events after balance sheet date

7

VAS 26 – Related parties disclosures


Partial VAS application

 

No.

VAS

Non applicable areas

1

VAS 02 - Inventory

Fixed general production costs shall be allocated into the processing cost of each product unit on the basis of the normal production capacity of machinery

2

VAS 03 - Tangible assets

Depreciation rate and depreciation method

3

VAS 04 – Intangible assets

4

VAS 06 - Leases

Assets sale and leaseback is operating lease

5

VAS 07 - Accounting for investments in associates

Equity method

6

VAS 08 - Financial reporting of interests in joint ventures

- Equity method;

- When a venturer contributes assets to a joint venture and has transferred the significant risks and rewards of ownership, the venturer should recognise only that portion of the gain or loss which is attributable to the interests of the other venturers.

- Where the joint venture resells the assets to an independent third party, the venturer is entitled to recognise that portion of the actual gain or loss which is arise from the sale of asset to joint venture.

- Where the joint venture resells the assets to an independent third party, the venturer is entitled to recognise that portion of the actual gain or loss which is arise from the sale of asset to joint venture

7

VAS 10 - The effects of changes in foreign exchange rates

Overseas activities inseparable from the operation of the reporting enterprises

8

VAS 15 – Construction contract

Recognition of revenue and costs in construction contract in case of payments made in line with the value of performed work volume

9

VAS 17 - Income tax

Deferred tax

10

VAS 21 – Presentation of financial statements

Elimination some disclosure in the financial statements

11

VAS 24 – Cash flow statements

Recommended not compulsory

12

VAS 29 – Net profit or loss for the period, fundamental errors and changes in accounting policies

Retroactive applied to changes in accounting policies


Non applicable VAS

 

1

VAS 11 - Business combination

2

VAS 19 - Insurance contract

3

VAS 22 - Disclosures in the financial statements of banks and similar financial institutions

4

VAS 25 - Consolidated financial statements and accounting for investments in subsidiaries

5

VAS 27 - Interim financial reporting

6

VAS 28 – Segment reporting

7

VAS 30 - Earning per share