Circular 99/2018/TT-BTC guiding the preparation of consolidated financial statements of State accounting units as superior accounting units

CIRCULAR

Guiding the preparation of consolidated financial statements of State accounting units as superior accounting units

Pursuant to the Law on Accounting dated November 20, 2015;

Pursuant to the Government’s Decree No. 174/2016/ND-CP dated December 30, 2016, detailing and guiding the implementation of a number of articles of the Law on Accounting;

Pursuant to the Government’s Decree No. 25/2017/ND-CP dated March 14, 2017, defining state financial statements;

Pursuant to the Government’s Decree No. 87/2017/ND-CP dated July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Director General of the Accounting and Auditing Supervisory Department;

The Minister of Finance issues a Circular guiding the preparation of consolidated financial statements of State accounting units as superior accounting units.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular regulates and guides the principles, methods of preparing and presenting consolidated financial statements of a state accounting unit comprising multiple affiliated accounting units.

Article 2. Subjects of application

1.  This Circular applies to state accounting units including: state agencies; public non-business units; organizations and units using the state budget; project management boards with legal entity status established by state agencies and public non-business units; agencies and organizations managing off-budget state financial funds; and organizations funded by the state to conduct operations for specific political and social objectives.

2. This Circular does not apply to units that already have their own regulations on the preparation of consolidated (combined) financial statements.

3. The State Reserve Fund shall not be consolidated into the report of the Ministry of Finance (a level-I budget-estimating unit).  The Ministry of Finance shall separately compile a report on the state reserve situation for use and consolidation by the State Treasury (hereinafter referred to as ST) into the state financial statements.

Article 3. Interpretation of terms

In this Circular, the terms bellow shall be construed as follows:

1. Supplementary financial information report is a report providing additional financial information outside the financial statements or consolidated financial statements prepared in accordance with regulations to serve the process of preparing the consolidated financial statements of the superior accounting unit.

2. Consolidated financial statements are a statement that provide information on the financial position, results of operations, cash flows from operations, and notes to the financial statements of the superior accounting unit as if it were an independent accounting unit.  Consolidated financial statement are prepared by the superior accounting unit, compiled from its individual financial statements (as a base-level accounting unit) and those of its subordinate units.

3. Individual financial statements are financial statements prepared by each base-level accounting unit according to the accounting regime that the unit is applying.  The individual financial statements provide information on the financial position, financial performance results and cash flows from operations of the base-level accounting unit, helping to enhance the unit's accountability for receiving and using resources in accordance with regulations, and at the same time providing information for the superior accounting unit to prepare consolidated financial statements.

4. The administrative non-business accounting regime includes the following accounting regimes:

The administrative non-business accounting regime and the accounting regimes developed and guided on the basis of the regulations of the administrative non-business accounting regime.

5. The superior accounting unit is the unit responsible for consolidating financial statements, including the level-I budget-estimating unit and the intermediate accounting unit assigned by the level-I budget-estimating unit to prepare consolidated financial statements of its subordinate units.

6. A affiliated accounting unit is a directly affiliated accounting unit responsible for preparing and submitting financial statements (or consolidated financial statements) to the upper-high level accounting unit as stipulated by the level-I budget-estimating unit. The affiliated accounting unit may include intermediate accounting units and base-level accounting units, or consists solely base-level accounting units.

Article 4. Reporting period

1. The consolidated financial statements of the upper-high level accounting unit shall be prepared on an annual accounting period basis.  In cases where the law stipulates a different reporting period, in addition to the annual report, the unit must also prepare consolidated financial statements for that period.

2. Supplementary financial information reports shall be prepared according to the accounting period of the consolidated financial statements.

Article 5. Responsibilities of units

1. Responsibilities of the level-I budget-estimating unit:

a) Level-I budget-estimating units, including: Ministries, sectors, and equivalent organizations at the central level; Provincial departments, boards, agencies, and equivalent units at the provincial level; Divisional units and equivalent units at the district level that are subject to preparing and submitting consolidated financial statements to the financial authorities, and the State Treasury at the same level as prescribed.

b) At the end of the annual accounting period, level-I budget-estimating units must receive, prepare and submit reports including:

- Receiving financial statements, consolidated financial statements, supplementary financial information reports from affiliated accounting units, and being responsible for controlling the reports received from affiliated accounting units.

- Preparing consolidated financial statements and supplementary financial information reports in accordance with the provisions of this Circular. Reconciling the figures on the prepared reports to ensure accuracy and consistency.

In case the level-I budget-estimating unit does not have affiliated accounting units, and has prepared its individual financial statements in accordance with the administrative non-business accounting regime, it must prepare supplementary financial information reports in accordance with the provisions of this Circular.

- Sending reports to the State Treasury at the same level to serve the preparation of the State financial statements (for units at the central and provincial levels) or the District-level consolidated financial information report (for units at the district level).

At the same time, sending reports to the financial authority at the same level to serve the reconciliation and verification of settlement figures as prescribed.

c) The level-I budget-estimating unit is responsible for deciding on assigning the task to subordinate intermediate accounting units to prepare consolidated financial statements, specifically as follows:

- The level-I budget-estimating unit at the central level may decide to organize one or more levels of intermediate accounting units to prepare consolidated financial statements.  The level-I budget-estimating unit at the local level (province, district) shall only organize a maximum of one level of intermediate accounting unit to prepare consolidated financial statements.

- The assignment of tasks to the subordinate intermediate accounting unit to prepare consolidated financial statements must be consistent with the organizational model, management requirements of the unit and current regulations. The intermediate accounting unit also serves as an upper-level budget-estimating unit in case the intermediate accounting unit is assigned the state budget estimate by the level-I budget-estimating unit and is responsible for allocating the budget to subordinate units.

The determination of intermediate units to be assigned to prepare consolidated financial statements is guided in detail in Appendix No. 04 “Determining Intermediate Accounting Units for Preparing Consolidated Financial Statements.”

d) The level-I budget-estimating unit shall specify the deadline for submitting financial statements, consolidated financial statements, and supplementary financial information reports of affiliated accounting units to ensure time for consolidating and submitting reports to the financial agency and the State Treasury at the same level as prescribed.

dd) The head of the level-I budget-estimating unit is responsible for the correctness, content and form of the consolidated report forms as prescribed in this Circular.

2. Responsibilities of the intermediate accounting unit:

a) The intermediate accounting unit is the superior accounting unit assigned by the level-I budget-estimating unit to prepare consolidated financial statements in accordance with the provisions of this Circular.

b) At the end of the annual accounting period, intermediate accounting units must receive, prepare and submit reports including:

- Receiving financial statements, consolidated financial statements, supplementary financial information reports from affiliated accounting units, and being responsible for controlling the reports received from affiliated accounting units.

- Preparing consolidated financial statements and supplementary financial information reports in accordance with the provisions of this Circular.  Reconciling the figures on the prepared reports to ensure accuracy and consistency.

- Submitting reports to the direct superior accounting unit as prescribed in this Circular.

c) The levels of intermediate units prescribed in this Circular include:

- Intermediate accounting unit 1 is the superior accounting unit, directly affiliated to the level-I budget-estimating unit. Intermediate accounting unit 1 may include intermediate accounting units 2 and directly affiliated subordinate accounting units. 

- Intermediate accounting unit 2 is the superior accounting unit, directly affiliated to intermediate accounting unit 1. Intermediate accounting unit 2 includes directly affiliated subordinate accounting units.

In case the level-I budget-estimating unit organizes more than 2 levels of intermediate accounting units, the units shall apply the consolidation of data according to the principles and methods of consolidation in this Circular.

d) The head of the intermediate accounting unit is responsible for the correctness, content and form of the consolidated report forms prepared.

3. Responsibilities of the base-level accounting unit

a) The base-level accounting unit is a subordinate accounting unit affiliated to the level-I budget-estimating unit or the intermediate accounting unit, which has an independent accounting apparatus, performs independent accounting, and must prepare individual financial statements in accordance with the accounting regime that they are applying.

b) At the end of an annual accounting period, base-level accounting units must prepare and submit reports as follows:

- Base-level accounting units applying the administrative non-business accounting regime:  Prepare individual financial statements in accordance with the administrative non-business accounting regime and prepare supplementary financial information reports as prescribed in this Circular.

- Base-level accounting units applying other accounting regimes (other than the administrative non-business accounting regime):  Prepare individual financial statements in accordance with the accounting regime being applied and do not have to prepare supplementary financial information reports.

- The prepared reports, after being reconciled to ensure accuracy and consistency, shall be submitted to the direct superior accounting unit as prescribed.

c) The heads of the base-level accounting units are responsible for the correctness, content and form of the prepared reports of their units.

Article 6. Report submission deadlines and recipients

1. For level-I budget-estimating units

a) Submitting reports providing financial information to the State Treasury according to Decree No. 25/2017/ND-CP, including:

- The level-I budget-estimating unit submits the consolidated financial statements and supplementary financial information reports to the State Treasury at the same level. Particularly, for level-I budget-estimating units without affiliated accounting units, submit financial statements and supplementary financial information reports to the State Treasury at the same level.

- The report submission deadline shall comply with the provisions of Decree No. 25/2017/ND-CP and relevant guiding documents.

b) Submitting financial statements to the financial authorities for annual settlement

The level-I budget-estimating unit submits the consolidated financial statements (or financial statements for level-I budget-estimating units without affiliated accounting units) to financial authorities at the same level according to the deadline for submitting budget settlement reports as prescribed.

2. For intermediate accounting units and base-level accounting units

Intermediate accounting units submit consolidated financial statements and supplementary financial information reports, and base-level accounting units submit financial statements and supplementary financial information reports to the direct superior accounting unit according to the deadlines specified by the level-I budget-estimating unit, ensuring time for consolidation and submission of reports to the financial authorities and the State Treasury at the same level as prescribed.

Article 7. Form of report submission

1. Reports sent to the superior accounting unit, financial authorities, and State Treasury shall be prepared on paper or transmitted in the form of electronic transactions, in accordance with the forms and codes prescribed in this Circular.

2. In the case of submitting reports on paper, the accounting unit shall send an accompanying data file for the upper-level unit for use in preparing consolidated financial statements. The superior accounting unit shall guide the data file format for the subordinate units within the scope of consolidated financial statement data.

Chapter II

REGULATIONS ON CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION REPORTS

Section 1.  CONSOLIDATED FINANCIAL STATEMENTS

Article 8. Purpose of preparing consolidated financial statements

1. Consolidated financial statements provide economic and financial information for users to consider and evaluate the financial position, performance results, and cash-generating ability of the superior accounting unit during the accounting period, serving as a basis for making decisions on management, investment operations and other decisions by the leadership at all levels and relevant parties, while enhancing the accountability of superior accounting units for receiving and using state resources in accordance with the provisions of law.

2. Consolidated financial statements of level-I budget-estimating units also provide information for preparing state financial statements as prescribed in Clause 1, Article 16, Clause 1, Article 17, and Clause 1, Article 18 of Decree No. 25/2017/ND-CP on state financial statements.

Article 9. Requirements for preparing consolidated financial statements

Consolidated financial statements must be presented coherently and systematically, in accordance with the forms and elements prescribed in this Circular. The data must ensure a truthful, objective, complete, timely and appropriate reflection of the financial position, performance results, cash flows from operations and notes to the financial statements of the superior accounting unit.

Article 10. Principles of preparing consolidated financial statements

1. Consolidated financial statements shall be prepared after the end of an annual accounting period (on December 31 of each year).

The reports of affiliated accounting units used as a basis for preparing consolidated financial statements must be prepared for the same reporting period as the consolidated financial statements. In case the annual accounting period end date is different from December 31, the affiliated accounting unit must prepare and submit reports for consolidation purposes in accordance with the provisions of this Circular.

2. Consolidated financial statement of the superior accounting unit must be fully consolidated, including financial information of all directly affiliated accounting units according to regulations; in which the elements of assets, liabilities, net assets, revenues, expenses, and cash flows of the superior accounting unit are presented in the corresponding report forms as if they were the reports of an independent accounting unit.

3. Consolidated financial statements of the superior accounting unit shall be aggregated according to corresponding elements on the basis of financial statement data of base-level accounting units implementing the administrative non-business accounting regime and consolidated financial statements of intermediate accounting units within the scope of preparing consolidated financial statements. Internal transactions within the reporting unit must be eliminated according to the provisions of this Circular.

4. Financial information of affiliated accounting units implementing other accounting regimes (other than the administrative non-business accounting regime) must be consolidated in the consolidated financial statement of the upper-level unit, including data on net assets and surplus/deficit (or post-tax profit) of the unit in the year.

Article 11. Internal transactions to be eliminated

1. Internal transactions are transactions among accounting units implementing the administrative non-business accounting regime, including transactions between the upper-level unit and the affiliated accounting unit, and among affiliated accounting units within the same scope of the unit preparing consolidated financial statements.

2. Data on internal transactions must be eliminated when consolidating the financial statements of the superior accounting unit, including the balance at the financial statement date for receivables, payables; financial investments and investments receipts among units within the reporting unit; and at the same time eliminating revenue, expenses, and cash flows arising among internal units during the year.

3. Before preparing consolidated financial statements, the superior accounting unit must reconcile internal transaction data among units within the reporting scope to ensure consistency, and then eliminate internal transactions. Internal transactions involving the purchase and sale of goods and assets must eliminate both revenue and expense elements for the entire value of the transaction.

Article 12.  List of consolidated financial statements

The forms and methods of preparing consolidated financial statements are prescribed in Appendix No. 01 "Consolidated Financial Statements” to this Circular.

Article 13. Regulations on the scope of preparing consolidated financial statements

1. Scope of preparing consolidated financial statements

a) In case the level-I budget-estimating unit does not assign the task of preparing consolidated financial statements to intermediate accounting units, the scope of consolidation of the level-I budget-estimating unit is the entire individual financial statements of the base-level accounting units affiliated to the level-I budget-estimating unit.

b) In case the level-I budget-estimating unit assigns the task of preparing consolidated financial statements to the intermediate accounting unit:

- For the intermediate accounting unit:  The scope of consolidation is the financial statements of the base-level accounting unit affiliated to the intermediate accounting unit and the consolidated financial statements of the subordinate intermediate accounting unit (if any).

- Level-I budget-estimating unit: The scope of consolidation is the financial statements of the base-level accounting unit subordinate to the level-I budget-estimating unit and the consolidated financial statements of the intermediate accounting unit affiliated to the level-I budget-estimating unit. 

c) In case there are changes during the annual accounting period, such as separation, merger, consolidation, transformation of type or ownership form, dissolution, termination of operation or transfer of a affiliated accounting unit, the superior accounting unit shall consolidate the report data of the year with changes arising on the basis of the reports of the existing subordinate units at the time of preparing the report and explain these changes.

2. Preparing and notifying the list of units within the scope of preparing consolidated financial statements:

a) At the beginning of the annual accounting period, level-I budget-estimating units must prepare and notify the list of all accounting units within the scope of consolidated financial statements in accordance with the provisions of this Circular to all units named in the list. This list must show the reporting relationship among the units and indicate the intermediate accounting units assigned to prepare consolidated financial statements.

b) In case there changes during the annual accounting period such as separation, merger, consolidation, transformation of type or ownership form, dissolution, termination of operation or transfer of a affiliated accounting unit, at the end of the year before preparing the report, the level-I budget-estimating unit must send a written notice to the units within the internal scope about the changes so that the related units have a basis for analyzing internal transactions when preparing supplementary financial information reports.

Units that have terminated their operations or transferred to another unit within the year must still be listed in the following year’s list and noted as terminated so that the unit preparing consolidated financial statements has a basis for explanation in the consolidated financial statements.

c) The list of units within the scope of preparing consolidated financial statements shall be sent to the State Treasury at the same level for reconciliation and explanation of figures when consolidating state financial statements.

Article 14. Receiving reports, checking data

1. At the end of the annual accounting period, the superior accounting unit must receive all financial statements, consolidated financial statements, and supplementary financial information reports from all affiliated accounting units within the scope of consolidation according to the list announced by the level-I budget-estimating unit.

2. After receiving all the reports as prescribed, the superior accounting unit must check and reconcile to ensure that these reports are prepared in the correct form,  with the reporting elements presented according to the accounting regime applied by the units; check and reconcile the report elements to ensure consistency and accuracy among related reporting elements in the reports, with clear and sufficient explanatory notes for the superior accounting unit to consolidate data as prescribed.

3. The superior accounting unit must reconcile internal transaction data on the supplementary financial information report as prescribed.

Article 15. Preparing data consolidation sheet and calculating elements

1. In the process of preparing consolidated financial statements, the superior accounting unit must prepare data consolidation sheets according to the forms prescribed in this Circular.  Data consolidation sheets serve as the basis for the superior accounting unit to prepare its consolidated financial statements and supplementary financial information reports.

2. Data consolidation tables shall be prepared on the basis of financial statement data of the base-level accounting unit, consolidated financial statements of the intermediate accounting unit and supplementary financial information reports of the accounting units within the scope of consolidation.

3. After consolidating data, the superior accounting unit must eliminate internal transactions and calculate elements to be presented on the consolidated financial statements.  The elements that need internal transaction elimination on the consolidated financial statements are as follows:

a) For the consolidated statement of financial position:

- Eliminate the balance at the financial statement date for internal receivables, including elements: receivables from customers, advances to suppliers, and other receivables.

- Eliminate the balance at the financial statement date for payables, including elements: payables to suppliers, advances from customers, and other payables.

- Eliminate the balance at the financial statement date for financial investments and investment receipts (short-term and long-term) among units within the reporting unit.

b) For the consolidated statement of operations:

-  Eliminate internal sales transactions during the year.

- Eliminate internal revenue transfer transactions in which both the transferring unit and the receiving unit reflect revenue on the statement of operations. 

c) For the consolidated statement of cash flows:

Eliminate cash flows within the internal scope of the unit preparing consolidated financial statements.

4. Data consolidation sheets shall be kept and stored by the superior accounting unit as for general ledgers.

5. List of data consolidation sheets:

The forms and methods of preparing data consolidation tables are prescribed in Appendix No. 02 "Data Consolidation Tables” to this Circular.

Article 16. Preparing consolidated financial statements

1. For the consolidated statement of financial position and the consolidated statement of operations:  The detailed elements are prepared based on the data from the Data consolidation sheet for financial statement elements (Form S02/BTH).

2. For the consolidated statement of cash flows, cash flows from operating activities shall be prepared using the indirect method, based on the data on the consolidated statement of financial position and the consolidated statement of operations for the same period of the unit. Cash flow from investing and financing activities shall be prepared based on the Data consolidation sheet for financial statement elements (Form S02/BTH).

3. Notes to the Consolidated Financial Statements

Detailed data section of the notes to the consolidated financial statements:  Based on the Data consolidation sheet for financial statement elements (Form S02/BTH) and Data consolidation sheet for supplementary financial information (Form S01/BTH) (section II. Consolidation of supplementary information data) to present detailed data according to the forms and formats prescribed in this Circular.

For other information, based on the reports of affiliated units and the general situation of the unit preparing consolidated financial statements to consolidate information on the Notes to Consolidated Financial Statements, ensuring full reflection of important information arising during the year of the affiliated units and the accounting unit preparing consolidated financial statements.

Article 17. Regulations on adjusting data on consolidated financial statements

1. In case during the process of consolidating reports, the superior accounting unit detects errors that need to be adjusted in the report data of the affiliated accounting unit (before the annual consolidated financial statements are submitted to the competent state agency), it shall request the affiliated accounting unit to adjust the data, prepare and resubmit the financial statements of the reporting year.

2. In case errors are detected after the annual consolidated financial statements have been submitted to the competent state agency, they must be corrected in the report data of the year in which the errors were detected and clearly explain this correction, unless the competent agency requests data adjustment and allows the consolidated financial statements to be re-prepared.

Article 18. Disclosure of consolidated financial statements

1. The level-I budget-estimating unit shall disclose consolidated financial statements in accordance with the provisions of law.

2. In case the consolidated financial statements of the level-I budget-estimating unit have been audited, the audit report of the audit organization must be attached when disclosing.

Section 2. SUPPLEMENTARY FINANCIAL INFORMATION REPORTS

Article 19. Purpose of the supplementary financial information report

1. Supplementary financial information reports are prepared to analyze detailed data of some elements on financial statements, consolidated financial statements, to provide information on internal transactions for the purpose of eliminating internal transactions when the superior accounting unit prepares consolidated financial statements, and at the same time providing additional explanatory information for the preparation of state financial statements.

2. In case the level-I budget-estimating unit does not have an affiliated unit that has prepared financial statements as prescribed in Circular 107/2017/TT-BTC dated October 10, 2017, on guiding the administrative non-business accounting regime, the supplementary financial information report shall be prepared and submitted to serve the elimination of internal transactions and the explanation of state financial statements when the State Treasury prepares state financial statements or district consolidated financial information reports.

Article 20. Requirements of the supplementary financial information report

1. The supplementary financial information report must be prepared from a base-level accounting unit on the basis of fully and properly recorded data, ensuring that payment relationships with related units are accurately and appropriately considered.

2. In case the level-I budget-estimating unit does not assign the task of preparing consolidated financial statements to the intermediate accounting unit but directly performs the task of consolidating statements from the base-level accounting units, the supplementary financial information report must separate transaction data including: Internal transactions within the level-I budget-estimating unit, internal transactions outside the level-I budget-estimating unit but within the state sector (if it is a local accounting unit, it must separate internal transactions outside the level-I budget-estimating unit but within the same province), and transactions outside the state sector.

3. In case the level-I budget-estimating unit assigns the task of preparing consolidated financial statements to the intermediate accounting unit, the transaction relationships on the supplementary financial information report, in addition to being separated in detail as prescribed in Clause 2 of this Article, must also be separated from internal transactions according to each level of the intermediate accounting unit preparing consolidated financial statements as prescribed.

 Article 21. Principles and reporting period of the supplementary financial information report

1. Supplementary financial information reports shall be prepared after the end of the annual accounting period together with financial statements and consolidated financial statements, presented according to the forms and elements prescribed in this Circular, including additional information elements for preparing the consolidated statement of financial position, consolidated statement operations, consolidated statement of cash flows, and notes to the consolidated financial statements.

2. Supplementary financial information reports of the base-level accounting unit shall be prepared on the basis of detailed accounting records at the unit.

3. Supplementary financial information reports of the superior accounting unit shall be consolidated from supplementary financial information reports of the affiliated accounting units within the scope of consolidation as prescribed.

Article 22. Supplementary financial information report form

The forms and methods of preparing supplementary financial information reports are prescribed in Appendix No. 03 "Supplementary Financial Information Report" to this Circular.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 23. Effect

This Circular takes effect on January 1, 2019 and applies to the preparation of consolidated financial statements from the fiscal year 2018.

Article 24. Organization of implementation

1. Ministries, sectors, People's Committees of provinces and centrally run cities are responsible for directing and implementing this Circular to level-I budget-estimating units and accounting units within the scope of preparing consolidated financial statements as prescribed in this Circular. 

2. The Director General of the Accounting and Auditing Supervisory Department; Chief of the Ministry Office and heads of related units under the Ministry of Finance are responsible for disseminating, guiding, inspecting and implementing this Circular./.

* All Appendices are not translated herein.