As the year draws to a close, firms will likely need to perform a stock take. With this in mind, the Vietnam Briefing runs through what firms need to do to ensure their stock take is as simple, quick, and effective as possible.
Stock takes are an important part of doing business. A stock take can be key to keeping track of stock-on-hand and wastage and is necessary in order to ensure that a firm's books are accurate.
But stock takes are not always necessarily easy and straightforward. There are often small nuances in how a stock take should be performed in different business types and in different tax jurisdictions. In this light, the Vietnam Briefing looks at what foreign firms need to know about conducting a stock take in Vietnam.
Why does a business need to perform a stock take?
A business may need to perform a stock take for any or all of the following reasons:
- Ensuring there is no discrepancy between the figures on their books and the inventory and assets on hand.
- Determining the quantity and quality of raw materials, goods, assets, cash, and any other items at the end of the accounting period. This may impact the value of assets recorded in the firm’s financial statement at the end of the accounting period.
- Identifying stagnant, damaged, or obsolete assets. In doing so firms can address and improve their efficiency, or make provisions for the devolution of assets at the end of the accounting period.
- Fulfilling due diligence needs in situations such as the sale, purchase, merger, or division of a company.
When is a stock take compulsory?
A stock take in Vietnam must be performed:
- At the end of the accounting year;
- In the event an entity is divided, merged, dissolved, terminated, bankrupt, or is sold or leased;
- When the type or form of ownership is changed;
- In the event of damage due to a fire, flood, robbery, or the like; and
- When instructed to do so by a state agency in order to reevaluate a firm’s assets.
Note that cash should be counted and the books should be reconciled daily.
Which types of assets need to be counted?
The assets that need to be counted in a stock take in Vietnam include:
- Cash: including cash on hand and petty cash.
- Fixed assets: machinery and equipment.
- Inventory: Inventory includes raw materials, tools, finished products, unfinished products, and goods held at the company's warehouse and rented warehouses, or other similar storage locations.
Steps for an effective stock take
1. Organize a stock take plan, including:
The first step in an effective stock take in Vietnam is to put together a plan. This should include:
- A timeline: How long will it take? When will it start and end?
- The location: Where will it be carried out?
- The participants: Who will perform the count? Who will consolidate and track the results?
- The objective: How will the results be compiled and presented?
2. Assemble the participants
Staff that should be a part of the stock take include:
- The leader of the stock take board;
- Any personnel in charge of managing assets and the firm’s inventory;
- The Chief Accountant; and
- Other staff independent of the above departments to ensure objectivity and accuracy.
3. Perform the stock take
The next step is to carry out the stock take. Firms should ensure they have an auditing firm to observe the stock take to ensure it is carried out accurately. Note that auditing firms can usually provide full-package stock take services. This can be helpful for firms to ensure they obtain transparent, accurate, and objective figures.
4. Create a stock take report
After completing a stock take, firms will need to compile the data they have collected into a stock take report. This should include:
- The signatures of the inventory staff, the asset management staff, and the independent participants.
- Analysis of the figures by the stock take council. These should be cross-checked with the figures from the fixed asset management department, the asset usage department, and the accounting department.
- The reconciliation results of the stock take identify discrepancies between the stock take report and the figures in the accounting ledger, if any. These should also be brought to the attention of the board of directors. The board of directors will decide how to handle each specific case for accounting recognition purposes.
Note: The specific procedures may vary depending on the type of business and the size of the company.
Further information
A stock take in Vietnam can be painstaking and time-consuming; however, they are essential to ensure the accuracy of accounting records and to assess the efficiency of a firm’s operations. Firms unfamiliar with the process or that need more support should contact the stock take experts at Dezan Shira and Associates.
