In the context of a continuously improving legal system regarding accounting and auditing, "total revenue" is not only a purely financial indicator but also becomes an important legal basis for determining the size of a business, mandatory auditing obligations, and the business's compliance responsibilities.
One of the questions currently of great interest to many businesses, chief accountants, and managers is: "How is total revenue in consolidated financial statements determined, and which report should be used as a basis according to the latest legal regulations?"
This article will comprehensively analyze the issue based on Point d, Clause 2, Article 1 of Decree No. 90/2025/ND-CP and Point b, Clause 2, Article 29 of the Accounting Law, while clarifying the interpretation and practical application.
The legal framework governing the determination of total revenue.
To correctly determine "total revenue" according to current regulations, it is first necessary to examine the legal framework governing this issue. In particular, the Accounting Law and Decree No. 90/2025/ND-CP are two key legal bases, clarifying the principles for preparing reports and the sources of revenue data used.
Regulations stipulated in the Accounting Law
According to point b, clause 2, Article 29 of the Accounting Law, the superior accounting unit is responsible for:
"Prepare consolidated financial statements or combined financial statements based on the financial statements of the subsidiary accounting units."
This regulation clearly states:
- When a business has subordinate accounting units (subsidiaries, dependent units),
- And it is subject to the requirement of preparing consolidated financial statements according to accounting standards.
- Consolidated financial statements are reports that fully reflect the financial position and operating results of the entire group of businesses.
This is the legal basis for determining the legitimate source of data when calculating important financial indicators, including total annual revenue.
New regulations in Decree 90/2025/ND-CP
Decree No. 90/2025/ND-CP amends and supplements the regulations guiding the Law on Independent Auditing, in which Point d, Clause 2, Article 1 clearly stipulates:
"Total revenue for the year is determined based on the financial statements of the immediately preceding year, prepared by the entity in accordance with accounting regulations."
This regulation is particularly important because:
- Total revenue is used as a criterion to determine whether a business is large-scale.
- It serves as the basis for determining which entities are subject to mandatory audits.
- And it must be determined from legitimate financial statements, of the type that the business is obligated to prepare.
If a business has consolidated financial statements, which statement should the “total revenue for the year” be taken from?
To answer and clarify the above issue, let's explore it further with MAN – Master Accountant Network:
What are consolidated financial statements?
Consolidated financial statements are reports prepared by the parent company that reflect the financial position, business results, and cash flow of the parent company and its subsidiaries as a unified economic entity.
Unlike individual financial statements:
- Individual reports reflect only the activities of a single legal entity.
- Consolidated reports exclude intercompany transactions and reflect the true size and revenue of the entire group.
Therefore, in a legal context requiring assessment of the actual size of a business, consolidated financial statements are of decisive importance.
So how should the "total annual revenue" target be interpreted?
According to the Accounting Law and Decree 90/2025/ND-CP, the indicator "total revenue for the year":
- Total revenue for the year is the revenue recorded in the financial statements of the immediately preceding year;
- The financial statements used must be those that the business is legally obligated to prepare.
So, if a business has consolidated financial statements, which statement should the "total revenue for the year" be taken from? There are two cases, specifically as follows:
- Businesses must prepare consolidated financial statements: Total revenue for the year is determined based on the consolidated financial statements of the immediately preceding year.
- For businesses that do not prepare consolidated financial statements: Total revenue for the year is determined based on the separate financial statements.
How to determine total revenue in each specific case.
Depending on whether or not a business is required to prepare consolidated financial statements, the data sources used to determine total revenue will vary. Below are specific methods for determining this in common situations.
Businesses required to prepare consolidated financial statements.
In this case:
- Consolidated financial statements are the most legally valid and complete annual financial statements.
- This reflects the total revenue generated from all production and business activities of the group of enterprises.
Therefore, when determining:
- Business size;
- Audit obligations;
- Or legal criteria related to total revenue for the year.
The figures must be taken from the revenue figures in the consolidated financial statements of the immediately preceding year, not from the parent company's separate financial statements.
Businesses that do not prepare consolidated financial statements.
If the business:
- No subsidiaries;
- Or not subject to the requirement of preparing consolidated financial statements according to accounting standards,
Then:
- The individual annual financial statements are the sole legal basis.
- Total revenue for the year is determined based on the figures in this Report.
The role of total revenue in determining the size of a large enterprise.
According to current regulations, a business is considered large-scale when it meets at least two of the following three criteria:
- Total revenue for the year exceeded the legally mandated threshold of 300 billion.
Total assets exceed 100 billion VND.
The average number of workers participating in social insurance each year exceeds 200 people.
In there:
- Total revenue from the immediately preceding year is a mandatory criterion to consider.
- And correctly identifying the data source (consolidated or separate) can directly affect whether a business is subject to mandatory auditing.
For example: Parent company A has 3 subsidiaries and is required to prepare consolidated financial statements.
- The consolidated financial report for 2025 recorded total revenue of VND 420 billion.
- The parent company's separate financial statements for 2025 recorded revenue of VND 180 billion.
When determining total revenue for 2025 to assess business size for 2026:
- The figure of 420 billion VND must be used because this is the figure from the consolidated financial statement. This is the report that the parent company is obligated to prepare according to the Accounting Law.
Important notes for businesses and accountants.
To properly apply the regulations on determining total revenue under the Accounting Law and Decree 90/2025/ND-CP, businesses and accountants need to pay attention to the following important issues.
- Always identify the correct type of financial statements that your business is obligated to prepare.
- Only use the financial statements for the immediately preceding year that have been prepared in accordance with regulations.
- Do not arbitrarily choose more favorable data if it is not consistent with the legal nature of the matter.
- In cases where there is a change in the business model (mergers, acquisitions, or the formation of subsidiaries), the obligation to prepare consolidated financial statements should be reviewed from the very first period.
Understanding and correctly applying how to determine total revenue not only helps businesses comply with the law but also avoids legal and audit risks in subsequent years.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
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.
Information cited:
- Accounting Law
- Decree 90/2025/ND-CP
- Article by LuatVietnam
