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Vinamilk with its extensive market share and position has gone into customers mind from
long time ago. From 1991 to 2005, Vinamilk is continously received the award of "Leading Unit
in emulation movement of Vietnam Intrustrial branch" by Goverment. Each year from 1995
2007, Vinamlik got Top brand in the Top Ten High-quality Vietnamese Goods by Saigon
Marketing Newspaper readers choice. Vinamilk wish to be the most favourite product in all
areas, territories. Therefore, it meditates that quality and creation is the companion of Vinamilk.
Vinamilk considers customers our focus and commit to meet all demands of customers. Besides,
it focuses on satisfy customers with high-quality, safe, and diverse products, the best service and
competitive prices. (Vinamilk, 2012)
Vinamilk is the leading Dairy & Beverage Company and also one of the 5 largest
companies in term of market capital listed in Vietnam. The brand Vinamilk, with its
extensive market share and position, has gone into consumers mind. Vinamilks quality
products are designed to offer the community a healthy and beautiful life. Vinamilk is the
leading producer of dairy products in Vietnam based on sales volume and revenue. The
company products range from core dairy products such as liquid and powdered milk, to
value-added dairy products such as condensed milk, drinking and spoon yoghurt, ice cream,
and cheese. It offer one of the largest dairy portfolios in Vietnam, across a wide selection
of products, flavours, and packaging sizes. According to Euromonitor, Vinamilk has
been the number one dairy player in Vietnam for the three years ending 31 December
2009. Since commencing operation in 1976 Vinamilk have built the largest distribution
network in Vietnam and have leveraged the network to introduce new products to the market,
such as juices, soya milk, bottled drinking water and coffee. (Vinamilk, 2012)
1.1. Describe the different users of financial statements and their needs of Vinamilk:
1.1.1. Internal Users:
Managers are these people appointed by the companys owner to supervise Vinamilk
the day by day with all of activities of the company. It is easy to see that they need information
about their companys current financial situation and what it is expected as well (BPP, 2004).
For example, manager of Vinamilk always interested in about the financial statement in
order to controlling Vinamilk operation such as the capital structure, the bad debt. For example,
Vinamilk has both short-term loans and long term loans. In detail, short-term loans in 2013 about
VND 60,374 million, Vinamilks CEO Mai Kieu Lien had to make planning so as to pay fully
loans on time. Moreover, manager is used the financial statement to adjust the suitable
investment capital.
Employees as the core factor in the company because the work directly to Vinamilk
activities day by day. Furthermore, they have not only had a special interest in the companys
existence but also a major effect on the success of Vinamilk. They should have a right to
information about Vinamilks financial situation, because their future job, discussing matters of
promotion, rankings and their wages, retirement benefits, and reward and so on.
For example, total assets, short-term, long term debt, sales figures which are the most
information they want to see. It is easy to see that the sales figures of Vinamilk increased from
30,948,602,127,306 VND in 2013 to 34,976,928,333,176 VND in 2014. It means the employees
believe in Vinamilk operation, thus they want to try more in order to develop their business.
1.1.2. External User
how effectively management is performing its function. Furthermore, they also need to know
how profitability management is running in Vinamilks operation and how much profit they can
efford to withdraw from business for their own use (BPP, 2004).
For instant, they want to know exactly the total assets, gross profit, and profit before tax and so
on. It is clear that the right and dividend of shareholders depends on the operating of Vinamilk
and the value of dividend which is shown exactly on the profit and loss account.
Trade contacts are including suppliers and customers (BPP, 2004). Suppliers are
providing to material for Vinamilk to ensure the milk-sources in the manufacturing process.
Hence, Vinamilk has to build-up the good relationship with their supplier because it provides
direct the raw-material for Vinamilk. There are some suppliers including Fonterra, Tetra with
Milk Power, Tetra with Carton packaging and packaging machines which are need information
from financial statement to know about Companys ability to pay its debts.
need to know that Vinamilk is a secure source of supply and is no danger of having to close
down (BPP, 2004). For example, Vinamilk brand still keep prestige in Vietnam market after
melamine milk in Vietnam. Vietnamese customers need detail information about the continuance
of Vinamilk in the long time, the suppliers are ensuring the quality of milk power or not.
Banks and investors are the important users with Vinamilks operation. It is clear that
Vinamilks capital not only from their stakeholders but also borrowing the banks or investors. A
bank permits Vinamilk to operate an overdraft, also provides long-term finance by granting a
loan (BPP, 2004). The banks and investors who pay attention into Vinamilk through financial
statement in order to ensure that Vinamilk is able to keep up with interest payment and
eventually to repay the amounts advanced. For example, a bank considering a short-term loan to
Vinamilk would want to know the financial position of Vinamilk at the time of the loan. It is easy
to see that, if Vinamilks revenue is more and more decrease, banks dont want to lend their
money to Vinamilk.
Inland Revenue and VAT authorities who need to know information from financial
statement such as profits of Vinamilk to assess the tax payable from Vinamilk in year. About
Vietnam Governments and their agencies, they are interested in the allocation of resources
and, therefore, the activities of Vinamilk. They also require information in order to provide the
basis for national statistics (BPP, 2004). Moreover, Vinamilk have to follow all the policies by
Government including taxation, interest rate, exchange rate, business profit tax, land-capital tax,
income tax and Quota in years. For example, the Government wants to see the profit before tax
because it is a core factor that influences the Vinamilks income tax. Besides, Government might
change some approriate strategy in the future in order to develop food industry.
Financial analyst and advisers need information for their clients so they pay
attention about the current performance of Vinamilk through data in financial statement. For
example, stockbrokers who need information to advise investors in stock and shares while credit
agencies need information to advise potential suppliers of goods to Vinamilk, and journalists
need information to provide to their reading public.
1.3. Assess the regulatory implications for users of financial statements :
Indeed, financial statement properly plays important role for managers decisions for the smooth
operation of Vinamilk. So as to provide a more comprehensive view of the financial position of
Vinamilk, financial analysis is performed with the information supplied in the financial
statements.
There are basically two uses of financial ratio analysis: to track individual firm performance over
time, and to make comparative judgments regarding firm performance (Reference for business,
2012)
The people who might be interested in financial information about a company may be classified
as follows:
Investors: they need information about profitability and the ability to generate cash to pay
dividends, and also about the risks in the investment. Financial statements should help an
investor to assess both the cash-generating capabilities of a company, and also its ability to
respond to risks and change. Therefore, they are interested in ratios which can help to generate
their capital like investment ratios; some of investment ratios the investors should care about is
ratios the investors should care about are profitability ratios like ROE and ROA ratio.
Employees: They should have a right to information about the companys financial situation,
because their future careers and the level of their wages and salaries depend on it. Employees are
easy to understand the financial current of Vinamilk such as profitability, dividend and so on.
Therefore they care about profitability ratios like ROE and ROA ratio Trade contacts: including
suppliers provide foods to the company on credit and customers who purchase foods or services
provided by the debts. Therefore, Trade contacts: including suppliers want to care about the
current debt to equity ratio is important in deciding the amount of long term capital that would
be required to be raised. Customers need to know that the company is a secure source of supply
and is in no danger of having to close down so that they pay more attention about liquidity
ratios like day sales inventory ratio or stock turnover ratios
Providers of finance: these might include a bank which permits the company to operate an
overdraft, or provides longer-term finance by granting a loan. The bank will want to ensure that
the company is able to keep up with interest payments, and eventually to repay the amounts
advanced. Therefore, they are interested in gearing ratios like debt-equity ratio and debt ratio
Government and their agencies are interested in the allocation of resources and therefore in the
activities of enterprises. They also require information in order to provide a basis for national
statistics. Therefore, they need information about profitability ratios of Vinamilk.
1.2. Explain the legal and regulatory influences on financial statements of Vietnamese listed
companies:
In terms of development of market economy, financial statements have a significant role in
providing important information to investors, the organization and management, market
management, the conditions for the push the stock market to develop effective and healthy. In the
context of the stock market is relatively nascent in Vietnam, the regulations and the actual
content of information and periodic publication of information in financial statement and anual
report of listed companies recently revealed some of the problems that affect critical to the
usefulness of information and the transparency of the market.
The VAS provides a standard chart of accounts, the format for internal accounting
documentation, and the bookkeeping records which must be maintained in the Vietnamese
language and currency for all types of transactions to be applied by all duly registered
enterprises. In case an enterprise wishes to use an accounting system other than VAS, or would
like to amend or supplement the VAS, they are required to submit this system for registration and
to obtain prior approval from the MOF. Approvals for non-VAT registrations will only be granted
for particular, specialized industries or in exceptional circumstances.
Currently, there are 26 Vietnamese Accounting Standards Issued by the Minister of Finance, to
be applied to all enterprises in all economic sectors in Vietnam, Vietnamese Accounting
Standards are under consideration to be reviewed and re issued in the coming years so that they
more closely align with IFRS issued by the International Federation of Accountants, and in
harmony with the economic development, legislation and accounting practice of Vietnam.
Accounting standards include basic accounting principles and methods for posting entries in
Accounting Year:
An accounting year is typically a period of twelve months, normally running from January 1st
through December 31st. However, an accounting year does not necessarily need to follow the
start and end dates of the twelve month calendar year. Accounting entities shall be permitted to
select an annual accounting period being twelve full months commencing from the beginning of
the first day of a month at the beginning of any one quarter until the end of the last day of the last
month of the previous quarter inthe following year, and accounting entities shall notify the
financial body for its information. The first accounting period runs from the date of issuing the
investment license to the last day of the accounting year.
Currency:
The official accounting currency unit is the Vietnamese dong. Transactions must be recorded in
the original currency and in dong, at the applicable exchange rate, or recorded in the original
currency and converted into dong at the applicable exchange rate in case such transactions is
implemented in a foreign currency. Where a particular form of foreign currency does not have an
exchange rate with the song, it must be converted via a convertible form of foreign currency.
However, other foreign currency informed to the directly managed tax authority is also used to
express all values in the accounts. The basic accounting unit for receipt and payment mainly in
foreign currency shall be selected from a type of foreign currency which the Ministry of Finance
stipulates to be used as a currency unit. However,when financial reports are prepared for use in
Vietnam, it must be converted into Vietnamese dong at the average interbank exchange rate
quoted by the State Bank at the balance sheet date.
List of assets:
Enterprise must provide a list of its assets including properties, materials, goods and funds at the
end of each accounting year. All existing assets of an enterprise are regulated to be inventoried as
well as provided with regular minutes of the inventory and consolidated reports on the inventory
of assets.
Annual financial reports must be submitted to authorities within duration of ninety days from the
date on which the annual accounting period ends.
Auditing Requirements:
The annual financial statements of enterprises must be audited once a year in compliance with
Vietnamese regulations and laws. The audit should be carried out by an independent auditing
company with license of operating in Vietnam. The enterprise takes legal responsibility of
providing information in a timely and sufficient manner, and explanations as well to the auditing
company. Financial reports should be prepared in compliance with the existing accounting
standards and accounting regime in order to provide an overall view and explanation of the
economic and financial situation of an accounting entity. Financial reports must be prepared at
the end of annual accounting periods or in accordance with other accounting periods regulated by
law. Financial reports must be prepared on the basis of the figures after the accounting books
were closed and with the correct contents and methods and consistence in all accounting period;
otherwise, the enterprise is required to provide an explanatory note. Financial reports must be
signed by the chief accountant, who prepares the financial reports, and the legal representative of
the accounting entity who takes liability for the contents.In general, financial reports of
accounting entities that conduct business operations include:
balance sheet
profit and loss statement
cash flow report
explanatory notes to the financial report
In addition, under the existing regulations of law, the annual financial report of an accounting
entity must be audited prior to its submission to the competent body and its publication. An audit
report must been closed with the annual financial report to be submitted to the competent body.
1.4. Explain how different laws/regulations are dealt with by accounting and reporting
standards:
The Vietnamese accounting standards is based on IAS with adjustments for economic, finance
and accounting Vietnam's conditions. However, there are still differences between Vietnamese
Accounting Standards (VAS) and International Accounting Standards and International Financial
Reporting Standards (IAS/IFRS).
First of all, Vietnams accounting standards and accounting system in parallel
implementation, this approach differs of most countries and not conducive to the development of
Vietnam's accounting standards and international convergence of accounting standards.
Secondly, Vietnamese accounting standards structure consists of the basic
standard and specific standards.
Thirdly, Vietnamese accounting standards less flexible than IAS, regulations not
enough detailte, some new problems have not yet involved, such as financial instrument,
impairment of assets, ect. Furthermore, in the specific accounting treatment and disclosure
requirements, Vietnamese accounting standards with international accounting standards also
there are many differences.
1. Purpose Convergence with International Accounting:
4.1. Calculate accounting ratios (Solvency, Profitability, Capital Gearing, Dividend Yield,
and Assets) to assess the performance and position of Vinamilk :
4.1.1. Profitability Ratios:
1. Return on equity (ROE) = PBIT/Equity
An indicator of how profitable a company is relative to its total assets. ROE gives an idea as to
how efficient management is at using its assets to generate earnings.
2014: (ROE) = PBIT/Equity = 7,613/ 19,680 = 38,7%
2013: (ROE) = PBIT/Equity = 8,010/ 17,545 = 45,6%
2. Profit margin = PBIT/Sales
It refers to the capability of making high or low extra profit on each product sold. This ratio helps
measure the relationship between sales and operating profits. The ratio measures profits against
sales. Despite showing a high sales figure, profit returns were very low.
2014: Profit margin = PBIT/Sales = 7,613/ 35,704 = 21,3%
2013: Profit margin = PBIT/Sales = 8,010/ 31,586 = 25,3%
3. Quick ratio
An indicator of a company's short-term liquidity, the quick ratio measures a company's ability to
meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better
the position of the company.
Quick ratio is calculated as: Quick Ratio = (Current Assets - Inventories) / Current Liabilities
2014: Quick Ratio = (Current Assets - Inventories) / Current Liabilities
= (15,522,309,519,016 - 3,620,107,245,454)/ 5,453,262,931,031 = 2,18
2013: Quick Ratio = (Current Assets - Inventories) / Current Liabilities
= (13,018,930,127,438 - 3,217,483,048,888)/ 4,956,397,594,108 = 1,98
The quick ratio is more conservative than the current ratio, a more well-known liquidity measure,
because it excludes inventory from current assets.
1. Total assets turnover
The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales
in dollars by assets in dollars.
Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the
higher the number the better.
2014: Assets turnover = 35,703,776,176,355/ 25,770,138,060,957 = 1,38
2013: Assets turnover = 31,586,007,133,622/ 22,875,414,056,636 = 1,38
2. Inventory turnover
A ratio showing how many times a company's inventory is sold and replaced over a period. The
The payout ratio provides an idea of how well earnings support the dividend payments. More
mature companies tend to have a higher payout ratio.
2014: Dividend payout ratio = 7,268,336,773/ 7,613,368,860,918 = 0,09%
2013: Dividend payout ratio = 22,767,489,751/ 8,010,256,856,719 = 0,28%