The process of preparing consolidated financial statements is becoming a mandatory requirement for many corporations as Decree 90/2025/ND-CP Officially effective from 2026, consolidated financial statements are not only a tool for aggregating data from parent and subsidiary companies, but also a crucial basis for determining business size, audit obligations, and financial transparency. This article will provide detailed guidance on the process of preparing consolidated financial statements according to Vietnamese Accounting Standards (VAS), helping businesses comply with the law and mitigate risks in the 2026 reporting period.
The strategic importance of the consolidated financial statements for 2026.
To understand the role of consolidated financial statements in the context of increasingly stringent financial regulations, businesses need to consider both the economic nature of this type of report and the significant legal changes starting in 2026. The following content will analyze these two core aspects in detail.
The concept and nature of economics
Consolidated financial statements are defined as the financial statements of a group (including the parent company and its subsidiaries) presented as if they were the statements of a single economic entity. The essence of the consolidated financial reporting process is the aggregation of resources, eliminating the effects of intercompany transactions to reflect the actual financial strength that the group controls.
The 2026 milestone and Decree 90/2025/ND-CP
Government Decree 90/2025/ND-CP marks a turning point in the management of large-scale enterprises. Previously, many businesses circumvented the law by splitting their operations within the parent company to avoid mandatory auditing obligations. However, the new regulation requires higher-level accounting units to base their revenue and total asset thresholds on the consolidated financial statements of the immediately preceding year. Thus, the 2025 figures in the consolidated report will directly determine the legal status of the enterprise in 2026.
Legal basis and accounting standards applicable to the consolidated financial statement preparation process.
To properly prepare consolidated financial statements, accountants need to adhere to the following legal regulations:
- Accounting Law No. 88/2015/QH13Regulations regarding the responsibilities of the superior accounting unit in preparing consolidated reports.
- Vietnamese Accounting Standard (VAS) No. 25 – Consolidated Financial Statements and Accounting for Investments in Subsidiaries: This is the "backbone" in terms of professional practice, guiding how to handle consolidation entries.
- Circular 202/2014/TT-BTC: Detailed guidance on the method of preparing and presenting consolidated financial statements (currently being updated to reflect new regulations).
- Decree 90/2025/ND-CP: Regulations on criteria for identifying large-scale enterprises and the audit roadmap.
After understanding the legal basis governing the preparation of consolidated financial statements, the next step for businesses is to accurately identify the entities to be consolidated within the group. Correctly identifying subsidiaries and assessing the parent company's control is a prerequisite for carrying out the consolidated financial statement preparation process fully and in accordance with accounting standards.
Required subjects and how to determine control rights.
One of the common mistakes in the consolidated financial reporting process is incorrectly identifying the entities to be consolidated.
Determine control
Control exists when the parent company directly or indirectly holds voting rights in the subsidiary. However, control can also be determined through other agreements such as:
- The right to govern financial and operational policies according to regulations or agreements.
- The power to appoint or dismiss a majority of the members of the Board of Directors.
- The right to cast a majority of votes at Board of Directors meetings.
Group and Subsidiary Unit Model
For state-owned corporations or diversified private conglomerates, identifying the "superior accounting unit" is extremely important. According to professional consolidated financial reporting procedures, all units within the control network must be included in the consolidated financial statements, except in special exceptions (such as subsidiaries with severely restricted operations).
The 7-Step Process for Preparing Comprehensive Consolidated Financial Statements
To ensure the consolidated financial reporting process, MAN – Master Accountant Network provides a detailed analysis of the steps involved as follows:
Step 1: Collect data and synchronize the accounting system.
The process of preparing consolidated financial statements begins with requiring all subsidiaries to submit their individual financial statements to the parent company.
- Synchronizing accounting periods: If a subsidiary's fiscal year end date differs from the parent company's by more than three months, the subsidiary must prepare an additional set of financial statements for consolidation purposes that coincide with the parent company's period.
- Currency synchronization: For overseas subsidiaries, accountants must convert financial statements from foreign currency to Vietnamese Dong (VND) according to the exchange rate stipulated in Circular 202/2014/TT-BTC.
- Standardize accounting policies: If the subsidiary uses a different depreciation method or revenue recognition method than the parent company, an adjusting entry must be made at this stage.
Step 2: Combine the financial indicators
This is a simple technical operation but requires absolute precision. The accountant adds up all the corresponding lines in the Balance Sheet and Income Statement from the subsidiary units. The result of this step is a summary table of raw data.
Step 3: Exclude the parent company's investment in the subsidiary.
This is a crucial point in the consolidated financial reporting process. The goal is to eliminate the portion of the subsidiary's net assets that has already been reflected in the parent company's book value of the investment.
- Journal entry: Record a decrease in the "Investment in subsidiary" item on the parent company's financial statements and a decrease in the corresponding equity on the subsidiary's financial statements.
- Handling of the difference: If the purchase price exceeds the fair value of the net asset, the surplus is held in the Goodwill account and amortized (for no more than 10 years).
Step 4: Determine Minority Interest (NCI)
In the consolidated financial reporting process, if the parent company does not own 100% capital, the value attributable to other shareholders must be separated. This helps readers of the report see the actual assets belonging to the group and those belonging to third parties.
Recipe:
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NCI = (Minority shareholder ownership ratio) x (Net asset value of the subsidiary at the reporting date) |
Step 5: Eliminate insider transactions and unrealized profits.
This is the most time-consuming step in the process of preparing consolidated financial statements for 2026. Businesses typically engage in transactions such as:
- Internal sales: The parent company sells raw materials to its subsidiary. This revenue must be completely excluded to avoid inflating the size of the business when considered under Decree 90/2025/ND-CP.
- Unrealized profits: If internally purchased inventory has not yet been sold to the market, the profit associated with that inventory must be written off. Otherwise, the group's total assets will be overvalued.
Step 6: Offset internal liabilities
All receivables, payables, and loans between members of the group must be offset to zero. The consolidated financial reporting process requires accountants to reconcile intercompany liabilities before making offsetting entries to ensure that both parties record matching figures.
Step 7: Finalize the consolidated financial statements and explanatory notes.
After making adjustments and elimination entries, the accountant compiles the final figures into the prescribed forms. The consolidated financial statement notes for 2026 need to pay particular attention to explaining the revenue and asset thresholds according to Decree 90/2025/ND-CP to demonstrate compliance with the large enterprise scale.
Reference: Price list for financial statement preparation services
Analyze the differences between consolidated revenue and individual revenue.
Decree 90/2025/ND-CP emphasizes that the assessment of large scale must be based on consolidated financial statements. Why is there this difference?
- Objectivity: Individual revenue figures may include fictitious internal sales to inflate sales. Revenue figures on consolidated financial statements only reflect the actual value received from outside the group.
- Reflecting actual resources: A conglomerate may have a small parent company but own dozens of huge subsidiaries. By only looking at individual reports, managers will miss their obligation to audit and manage risks on a system-wide scale.
Real life example: A conglomerate has a cumulative total revenue of VND 5,000 billion from its member companies, but VND 2,000 billion of that is from internal sales transactions. When preparing consolidated financial statements, the actual revenue used to determine the scale according to Decree 90/2025/ND-CP is only VND 3,000 billion.
Risks and Consequences of Incorrectly Determining the Consolidated Financial Reporting Procedure
Inaccurate implementation of consolidated financial reporting procedures will lead to serious legal and operational consequences in 2026:
Mismatch in business size classification
If intercompany transactions are omitted, consolidated revenue is inflated, unfairly classifying the business as "large-scale," leading to increased compliance and audit costs. Conversely, if excessive exclusions result in lower-than-actual revenue to evade audits, the business will face severe penalties during tax audits.
Administrative penalties and suspension of information disclosure.
According to regulations on penalties in the field of accounting, the failure to prepare consolidated financial statements in accordance with standards or the failure to prepare consolidated financial statements when mandatory can result in fines of up to hundreds of millions of VND and directly affect the reputation of the legal representative.
Loss of investor confidence
Consolidated financial statements are the most important document for investors to assess the business performance of a corporation. A lax consolidated financial reporting process will create "illusory figures," leading to erroneous investment decisions and subsequent litigation.
New updates from the Ministry of Finance and guidance for the 2026 roadmap.
To support businesses in effectively preparing consolidated financial statements, the Ministry of Finance regularly issues guidance documents and answers frequently asked questions. Some new points to note for 2026 include:
- Substance over form: In determining control, implicit agreements or potential rights are also given closer scrutiny.
- Enhance the transparency of the Notes to the Acquisition: Require detailed explanations of how internal gains are excluded and the method used to determine the fair value of net assets at the date of acquisition.
- Corporate cash flow control: Consolidated cash flow statements must clearly separate cash flows from actual operating activities from internal cash flows.
Recommended optimal solutions for large-scale businesses.
To prepare consolidated financial statements efficiently and cost-effectively, businesses should consider the following solutions:
Invest in a synchronized ERP system.
Manually generating reports using Excel often leads to errors and delays. A robust ERP (Enterprise Resource Planning) system will automate accounts receivable reconciliation and perform internal offsetting entries instantly.
Develop a corporate accounting manual.
The parent company should issue a detailed set of operational guidelines for all its subsidiaries. This ensures consistency in the consolidated financial reporting process right from the initial data entry stage at the member units.
Utilize professional consulting services.
For corporations with complex structures or subsidiaries abroad, reference is necessary. accounting services, financial reporting services Investing in a specialized unit like MAN – Master Accountant Network – to review the consolidated financial reporting process is a worthwhile investment. MAN's experts will help businesses optimize their data, ensure compliance with Decree 90/2025/ND-CP, and minimize the risk of their reports being rejected by regulatory authorities.
Conclude
As 2026 approaches, stricter requirements for financial transparency are becoming necessary. Consolidated financial reporting is no longer an option but a mandatory obligation for large economic entities. By understanding and accurately applying the consolidated financial reporting process, businesses can not only protect themselves against the legal sanctions of Decree 90/2025/ND-CP but also affirm their stature and reputation as a professional corporation in the market.
Start reviewing your data systems today, preparing for a successful and transparent 2026 reporting period. A proper consolidated financial reporting process is key to unlocking a truthful financial picture, enabling sustainable business growth in the new era.
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
- E-mail: 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.
Frequently Asked Questions about the Consolidated Financial Statement Preparation Process
According to Vietnamese Accounting Standard No. 25 (VAS 25) and the 2015 Accounting Law, a parent company is required to prepare consolidated financial statements when it holds controlling interest in one or more subsidiaries, except in certain cases where exemptions are granted as specifically stipulated by the Ministry of Finance (for example, the parent company is also a subsidiary of another group that has already prepared consolidated financial statements).
According to Decree 90/2025/ND-CP, the threshold for large enterprises in 2026 will be determined based on total revenue and total assets in the consolidated financial statements of the fiscal year 2025 (the preceding year).
The purpose of this is to eliminate the influence of inter-unit sales within the same system. Without this exclusion, the group's total revenue would be counted twice, failing to accurately reflect the actual value of goods/services supplied to the market, leading to discrepancies in assessing the size of the business.
Goodwill arises when the consolidation cost exceeds the fair value of the subsidiary's net assets at the acquisition date. This amount is presented as an asset on the consolidated balance sheet and is amortized into administrative expenses over a period not exceeding 10 years.
Accountants must convert the subsidiary's financial statements to the parent company's reporting currency (usually VND) using the actual exchange rate or the average exchange rate of the reporting period, as guided by Circular 202, before proceeding with the consolidation steps. When is a business required to prepare consolidated financial statements?
What data will be used to determine the size of a large enterprise in 2026?
Why is intercompany revenue excluded from the consolidated financial reporting process?
How are goodwill treated in consolidated financial statements?
What should be done if a subsidiary company uses a different accounting currency than its parent company?
