The Art Of Translating Financial Statements

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Written by: Phương Thảo

INDUSTRY INSIGHTS | FINANCIAL TRANSLATION

For corporations, multinational companies, enterprises, and units with foreign investment, translating financial statements and other economic documents is a regular job. They help clients capture the financial situation by month, quarter, or year of the business. From these reports, managers can develop business strategies: the right goals to run the company determine the business’s survival.

translating financial statements

1. What Is A Financial Statement?

First of all, financial statements are summaries of all information related to the financial position, business, and cash flows of an enterprise. Based on that, relevant people will make economic decisions for businesses and companies.

Some basic types of financial statements:

– Account balance sheet showing details of opening balance, arising amount, and ending balance of all accounting accounts using accounting

– Revenue and expenditure report including budget revenue and expenditure, effective revenue and expenditure solutions

– Notes to financial statements

The above types of financial statements all play an important role in every company or business. Help them to identify the business situation of their business, thereby building the next development steps in the future.

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2.Why Do You Need To Translate Financial Statements?

Financial statements play an important role in helping the state manage business operations. For foreign-invested enterprises, financial statements need to be notarized and translated before submitting to state agencies (quarterly or annually).

Financial statements are also often translated into English so that companies can bid on related projects abroad. Accurately translating financial statements into English will help foreign partners understand the capabilities of the business.

In addition, translating financial statements into English also helps leaders who use English to read and understand financial statements more easily. Therefore, the need to translate financial statements into English is very necessary for businesses with foreign elements (foreign investment, foreign joint ventures)…

3. The Essentials of Financial Statement Translation

Along with globalization in recent years, mergers and acquisitions activities with foreign enterprises are becoming more exciting as the number of foreign investors increases. Accordingly, the disclosure of information in English has also become more urgent to share financial information of businesses. Furthermore, with the advent of the International Financial Reporting Standards (IFRS), there is a need to disclose information about financial statements in English for audits following International Standards.

Notice of settlement status

All joint stock companies are obliged to disclose the settlement information to a random majority of people. Unlike a voluntary notification, this “notification” must make a particular document publicly available to the public based on the law.

The company must be approved by the General Meeting of Shareholders after the end of the fiscal year and must promptly disclose the financial statements.

Means of notification are newsletters, newspapers, or electronic notices (posting on websites). In case the company needs a web version in English, a translation of the settlement notice is necessary.

4. What does Financial Statement Translation Include?

Financial Statements are the most general reports on the status of assets, equity, and liabilities as well as the financial position and business results in the period of an enterprise. Financial statements (financial statements) provide information related to the financial activities of an enterprise, such as assets, liabilities, equity, revenue, profit, cash flow, etc. The report is usually published regularly. at the end of each quarter and the end of the year.

A complete set of translated financial statements typically includes:

4. What does Financial Statement Translation Include?

Financial Statements are the most general reports on the status of assets, equity, and liabilities as well as the financial position and business results in the period of an enterprise. Financial statements (financial statements) provide information related to the financial activities of an enterprise, such as assets, liabilities, equity, revenue, profit, cash flow, etc. The report is usually published regularly. at the end of each quarter and the end of the year.

A complete set of translated financial statements typically includes:

4.1. Translating the report of the Board of Directors

The report of the Board of Directors includes information such as the performance of production and business tasks in the year, evaluation of performance results, and direction of the next year’s activities.

4.2. Translating reports of independent auditing firms

Independent audit’s report contributes to the publicity and transparency of financial statements of enterprises and organizations; a healthy investment environment; detect and prevent violations of the law, thereby improving the efficiency of economic and financial management and administration of the State and business activities of enterprises.

4.3. Translating Balance Sheet

The balance sheet reflects the overall position of the enterprise’s assets in terms of value and origin at a certain point in time. The balance sheet must include the following major items: 

  • Cash and cash equivalents; 
  • Short-term financial investments; 
  • Trade and other receivables;
  • Inventories; 
  • Other short-term assets; 
  • Tangible fixed assets; 
  • Intangible fixed assets; 
  • Long-term financial investments; 
  • Cost of construction in progress; 
  • Other long-term assets; 
  • Short-term loans; 
  • Trade and other short-term payables; 
  • Taxes and other payables to the State; 
  • Long-term loans and other long-term liabilities; 
  • Provisions;
  • Minority share ownership; 
  • Contributed capital; 
  • Reserves; 
  • Undistributed profits.

4.4. Translating cash flow statements

The cash flow statement provides information about economic transactions that affect the cash position of the Enterprise.

The statement of cash flows is prepared based on cash receipts and expenditures, reflecting the formation and use of the amount of cash arising in the reporting period of the Enterprise.

The basic parameters of the cash flow statement include : Cash flow from operating activities; Cash flow from investing activities; Cash flow from financing activities. Cash at the beginning of the period + Cash received in the period = Cash spent in the period + Cash at the end of the period.

4.5.Translating notes to financial statements

Notes to the financial statements include narrative descriptions or more detailed analysis of the figures shown in the Balance Sheet, Income Statement. and Statement of Cash Flows as well as other necessary additional information. These include information required by other accounting standards and other information necessary for a true and fair presentation.

The notes to the financial statements are usually presented in the following order

a) Statement of compliance with Vietnamese accounting standards and regimes;

b) An explanation of the assessment basis and applied accounting policy;

c) Additional information for the items presented in each financial statement in the order in which each line item and each financial statement are presented;

d) Presentation of changes in equity;

e) Other information, including:

  • Contingent liabilities, commitments, and other financial information;
  • Non-financial information.

Conclusion

Since formality is of the utmost importance in financial reporting, even the smallest errors should not be overlooked and translations should be completed to the fullest extent.

 

Also, it is not possible to translate financial statements without the knowledge of accountants. Algorithmic accounts and accounting algorithms used in the above financial statements have a fixed concept and meaning, so when translating from Japanese to English, because it is a general English translation, will have a field that read, in a different sense.

 

Financial statements are important documents that help maintain a reliable relationship between the company and its related parties, as well as the associated equipment to identify new transactions. This must be the text may be media to the contention, also be easy to understand as an adjective of the company that to the head house and the classic.

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