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How to Read Financial Statements of Vietnamese Companies

As Vietnam continues to grow as a regional economic powerhouse, foreign investors and international partners are increasingly evaluating Vietnamese companies for partnerships, acquisitions, or investment. One of the most essential tools in this evaluation process is the financial statement. However, reading Vietnamese financial statements requires not just accounting knowledge, but also an understanding of the local standards and business practices.

This guide breaks down the Vietnamese financial reporting system, explains how to read key components of financial statements, and highlights what international stakeholders need to look out for.

Understanding Vietnam’s Accounting Framework

Most Vietnamese companies follow the Vietnamese Accounting Standards (VAS), which are developed by the Ministry of Finance. While these standards draw inspiration from the International Financial Reporting Standards (IFRS), there are key differences in presentation, measurement, and disclosure.

Vietnam is currently in the process of adopting IFRS on a voluntary basis, particularly for listed and large companies. Learn more about this transition here:
🔗 IFRS Adoption in Vietnam – PwC

The Four Core Financial Statements in Vietnam

Like many other countries, Vietnamese companies are required to prepare four primary financial reports:

Balance Sheet (Bảng cân đối kế toán)
Income Statement (Báo cáo kết quả hoạt động kinh doanh)
Cash Flow Statement (Báo cáo lưu chuyển tiền tệ)
Notes to Financial Statements (Thuyết minh báo cáo tài chính)

Let’s explore each one in detail Vietnam-Agent.com.

1. Balance Sheet – Snapshot of Financial Health

The balance sheet shows the company’s financial position at a given point in time. It is divided into three main parts:

Assets

Current Assets (Tiền và tài sản tương đương tiền, hàng tồn kho): Includes cash, accounts receivable, inventory, etc.
Non-Current Assets: Long-term investments, fixed assets, intangible assets.

Liabilities

Short-Term Liabilities: Payables, accrued expenses, short-term loans.
Long-Term Liabilities: Bonds payable, long-term loans, deferred tax liabilities.

Equity (Vốn chủ sở hữu)

Includes owner’s capital, retained earnings, and reserves.

📘 Tip: A strong balance sheet has healthy working capital (current assets > current liabilities) and a low debt-to-equity ratio.

2. Income Statement – Profitability Over Time

This statement covers a period of time and shows the company’s performance in generating profit. Key line items include:

Revenue (Doanh thu thuần): Total income from core operations.
Cost of Goods Sold (Giá vốn hàng bán): Direct costs of producing goods or services.
Gross Profit (Lợi nhuận gộp) = Revenue – COGS.
Operating Expenses: Selling, administrative, and financial costs.
Profit Before Tax (Lợi nhuận trước thuế) and Net Profit (Lợi nhuận sau thuế).

📘 Investors should look for trends in gross margins, net profit margins, and year-over-year revenue growth.

3. Cash Flow Statement – Liquidity and Real-Time Performance

Cash flow statements are divided into three main sections:

Operating Activities: Cash from normal business operations.
Investing Activities: Purchase or sale of assets and investments.
Financing Activities: Loans, dividends, issuance of shares.

📘 A positive cash flow from operating activities indicates sustainable business performance. Be cautious of companies with consistent profits but negative operating cash flow.

🔗 Cash Flow Statements Explained – VietnamCredit

4. Notes to Financial Statements – Hidden Insights

The Notes (Thuyết minh) offer important details behind the numbers. These include:

Accounting methods used
Breakdown of major expenses or revenues
Contingent liabilities
Related party transactions

📘 Always read the notes carefully. They reveal risks, tax treatments, and non-standard accounting treatments not obvious in the main reports.

Key Financial Ratios for Vietnamese Companies

To evaluate performance and financial health, investors should use these key ratios:

Liquidity Ratios

Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets – Inventory) / Current Liabilities

Profitability Ratios

Gross Margin = Gross Profit / Revenue
Net Margin = Net Profit / Revenue
ROE = Net Profit / Shareholder’s Equity
ROA = Net Profit / Total Assets

Leverage Ratios

Debt-to-Equity = Total Liabilities / Equity
Interest Coverage = EBIT / Interest Expense

🔗 How to Read Vietnamese Financial Reports – Vietnam Briefing

Differences Between VAS and IFRS: What Foreigners Should Know

While VAS is relatively conservative and rule-based, IFRS focuses more on fair value and investor transparency. Differences include:

Limited use of fair value accounting in VAS
Less rigorous disclosure requirements
Simpler accounting for complex instruments (leases, derivatives)

Vietnamese companies transitioning to IFRS are seen as more transparent and globally aligned.

🔗 Vietnam’s IFRS Implementation Roadmap – Deloitte

Red Flags and Pitfalls to Watch

When analyzing financial statements of Vietnamese companies, here are some warning signs:

Sudden jumps in revenue or profit without explanation
Unusually high receivables (could signal poor collection)
Negative cash flow despite reported profits
Frequent changes in accounting methods
Auditor opinions with reservations or disclaimers

Auditor Reports – Don’t Skip This Section

At the end of every financial statement, you’ll find the independent auditor’s opinion. An “unqualified opinion” indicates that the financials are presented fairly.

Be cautious if you see:

Qualified or adverse opinions
Notes on inconsistencies or going-concern issues

Where to Find Vietnamese Company Financial Statements

Depending on the type of company, here are common sources:

Listed companies: Look on HOSE (Ho Chi Minh Stock Exchange), HNX, or company investor relations pages.
Private companies: You can request via business registration offices or use commercial credit services like:

Final Thoughts: Why Financial Statement Literacy Matters

Whether you’re an investor, sourcing partner, or business consultant, knowing how to read Vietnamese financial statements gives you an edge in:

Spotting good investment opportunities
Avoiding risky ventures
Negotiating deals based on real financial health
Understanding industry norms and growth trends

With Vietnam becoming a top destination for manufacturing and foreign investment, financial due diligence has never been more important.

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