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REVENUE RECOGNITION IN VIET NAM

Chapter 4

VAS 14, 15
INCOME MEASUREMENT
(AND PROFITABILITY ANALYSIS)
Circular 200/2014

© 2013 The McGraw-Hill Companies, Inc. 5-2

Revenue Recognition Revenue Recognition under VAS 14,15

Revenue is the gross inflow

VAS 14 VAS 15
of economic benefits during Accruals
the period arising in the
course of the ordinary
activities of an entity when
those inflows result in
increases in equity, other Goods Services Construction contract
than increases relating to Prudence Matching
contributions from equity
participants

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Revenue Recognition for sales of goods: Revenue Recognition for sales of services:
The following revenue recognition criteria to be satisfied before The following revenue recognition criteria to be satisfied before
revenue is recognized: revenue is recognized:
a) The amount of revenue can be
a) The seller has transferred most of risks
measured reliably
and rewards of ownership
b) The seller have received or will
b) The seller doesn’t effectively manage
received economic benefits from the
or control the goods
sale transaction.
c) The amount of revenue can be
c) The stage of completion can be
measured reliably
measured reliably.
d) The seller have received or will
d) Incurred cost and cost to the complete
received economic benefits from the
maybe determined
sale transaction.
e) Cost related to sale transaction may be
determined.

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Revenue Recognition under VAS 14,15
Measurement of REVENUE
= fair value of consideration received or receivable
Revenue Recognition under VAS 14,15
Revenue is determined according to the reasonable value of
received or receivable amounts. It is determined as the
reasonable value of received or receivable amounts minus (-)
trade discount, payment discount, reductions in the price of
goods sold and value of returns of goods sold.

Cash Discounted Fair value of  For cash amounts or cash equivalents not yet immediately
future receipts goods or services received, turnover shall be determined by converting the
received nominal value of amounts receivable in future into the actual
value at the time of turnover recognition at the current
interest rates. The actual value at the time of turnover
recognition may be smaller than the nominal value
receivable in future.

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Revenue Recognition for construction contract

Revenue Recognition under VAS 14,15 (read by your self)
 When goods or services are exchanged
for goods or services of similar nature and
Revenues of a
value, such exchange shall not be construction contract
regarded as a revenue-generating
transaction.

When goods or services are exchanged for goods or services of

dissimilar nature and value, such exchange shall be regarded as a
revenue-generating transaction. In this case, revenue shall be Increase and
determined as reasonable value of the received goods or services after Initial revenue decrease Bonuses and
adjusting cash amounts or cash equivalents additionally paid or inscribed in the amounts in the other payments
received. Where it is impossible to determine the reasonable value of contract contract
the received goods or services, revenue shall be determined as equal to performance
the reasonable value of the exchanged goods or services, after
adjusting cash amounts or cash equivalents additionally paid or
received.
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Revenue Recognition for construction contract Special cases: Revenue Recognition

under Circular 200
shall be recognized by
reference to the
Revenues of a construction Circular
completed volume
contract 200

Payments according to Payments according to the

the set schedule value of performed work volume

promotional goods Replacement The program Real Estate

Revenue shall be
determined by the
contractor on the date of
compiling financial
statement
when buying products, goods, for traditional
The revenues shall be goods equipment customer
recognized by reference
to the completed work
volume certified by the
customers in the period

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Revenue Recognition under Circular 200
promotional goods
when buying goods
The nature of the transaction is
discount, free gift products in the
form are known as promotion but in
nature are sale because customers
will not qualify if they do not buy the
product.
In this case, the value of free gift
products is recorded in cost price
and revenue corresponding to the
fair value of such products must be
recorded
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Revenue Recognition under Circular 200
The program
for traditional
customer When selling goods or services in
program for traditonal customer,
accountants record revenue on the
basic that the total amount received
minus uneared revenue
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Revenue Recognition under Circular 200
Replacement
products, goods,
equipment
In case of selling products and
goods with replacement products,
goods, equipment (in case of
malfunction prevention), turnovers
for shall products, goods sold and
replacement products, goods,
equipment must be allocated.
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Revenue Recognition under Circular 200
The following revenue recognition criteria to be
Real Estate satisfied before revenue is recognized:
a) The real estate has completed and transfered to
buyer; seller has transferred risks and rewards
of ownership
b) The seller doesn’t effectively manage or control
the real estate
c) The amount of revenue can be measured reliably
d) The seller have received or will received
economic benefits from the sale transaction.
e) Cost related to sale transaction may be
determined.
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Activity Ratios (self-study) Profitability Ratios (self-study)

Asset Turnover Ratio
Receivables Turnover Ratio
Average Collection Period
Inventory Turnover Ratio
Average Days in Inventory
Activity Ratios
Profitability Ratios
Net Sales ÷ Average Total Assets
Profit Margin on Sales Net Income ÷ Net Sales
Net Sales ÷ Average Accounts Receivable
Return on Assets Net Income ÷ Average Total Assets
365 ÷ Receivables Turnover Ratio
Return on Shareholders' Equity Net Income ÷ Average Shareholders' Equity
Cost of Goods Sold ÷ Average Inventory
365 ÷ Inventory Turnover Ratio
Return on Equity Key Components
Whenever a ratio divides an Profitability
income statement balance by a
statement of financial position
Activity
balance, the average for the Financial Leverage
year is used in the denominator.

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DuPont Framework (self-study)

The DuPont framework helps identify how profitability,
activity, and financial leverage trade off to determine
return to shareholders:
Return on Profit Asset Equity
equity = margin X turnover X multiplier

Net income Net income Net sales Avg. total assets

Avg. total = Net sales X Avg. total X Avg. total equity
equity assets

Because profit margin and asset turnover combine to

equal return on assets, the DuPont framework can also be
This is called the DuPont
written as: because the DuPont
framework
Return on Return on
Company was a Equity
pioneer in
equity = assets X multiplier
emphasizing this relationship.
Net income Net income Avg. total assets
Avg. total = Avg. total X Avg. total equity
equity assets

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