SCRIPT FnB

Introduc1on to Types of Accoun1ng and Accoun1ng Principles

Hello everyone, today we’ll be discussing two key areas in accoun7ng: types of accoun7ng and
the principles that govern them. Accoun7ng is a systema7c process that helps organiza7ons
record, classify, summarize, and interpret financial transac7ons, all aimed at suppor7ng
decision-making."
1. PASSAGE 1 :Types of Accoun1ng and accoun1ng principles
1 nhỏ : Types of accoun1ng :
"There are two main types of accoun7ng: financial accoun1ng and managerial accoun1ng.
• Financial accoun1ng focuses on preparing financial statements that are shared with
external stakeholders—like investors, creditors, and regulators. These statements give an
overview of a company's financial health, enabling stakeholders to make informed
decisions.
• On the other hand, managerial accoun1ng provides financial informa7on to internal
management. This informa7on is crucial for planning, decision-making, and control
within the organiza7on. It helps management keep track of costs, performance, and
opera7ons in order to steer the company effec7vely."
Accoun1ng Principles
"To ensure consistency, reliability, and comparability, accoun7ng is governed by a set of
principles. These principles help standardize the prepara7on of financial statements, making
sure that users of these statements can trust the data.
The two main sets of accoun7ng standards are:
• GAAP (Generally Accepted Accoun7ng Principles), primarily used in the United States.
• IFRS (Interna7onal Financial Repor7ng Standards), which is adopted by most countries
globally.
While GAAP follows a more rules-based approach, IFRS is more principles-based, allowing for
more judgment in financial repor7ng. Both aim for transparent, comparable, and reliable
financial informa7on."
Key IFRS Accoun1ng Principles
"Let’s dive into some key IFRS principles:
1. Accrual accoun1ng: Revenues and expenses are recognized when earned or incurred,
not when cash is exchanged.
2. Going concern: It assumes that a business will con7nue its opera7ons indefinitely.
3. Consistency: Accoun7ng principles must be applied consistently from one period to the
next.
4. Matching principle: Expenses should be matched with related revenues in the same
period.
5. Full disclosure: All relevant financial informa7on must be disclosed in financial
statements.
6. Materiality: Only significant financial informa7on needs to be disclosed.
7. Prudence: Accountants must exercise cau7on when making es7mates or judgments.
IFRS also introduces fair value accoun1ng, where assets and liabili7es can be valued at their
current market value, giving a more accurate snapshot of a company’s financial posi7on."
 2. Passage 2 : Introduc1on to Financial Statement
A. Importance of Financial Statements
- Essen7al for making investment and business decisions
- Provides insight into a company's financial health and performance
- Helps investors and business owners make informed decisions
B. Steps for financial statement analysis
Income Statement Analysis : Shows company’s revenue, expenses, and net income
- Key points : Revenue growth and gross profit margin
Balance Sheet Analysis : Shows company's assets, liabili7es, and equity.
- Key point : Current ra7o
Cash Flow Statement Analysis
- Shows cash inflow and oublow
- Key point : Opera7ng cash flow
Comparing Financial Statements to Compe7tors:
- Iden7fy performance rela7ve to compe7tors
- Key point: Key financial ra7os.
Making Investment and Business Decisions:
- Posi7ve indicators: Healthy growth, strong current ra7os, and posi7ve cash flow.
- Nega7ve indicators: High debt and nega7ve cash flow.

3. Passage 3 : Analysis of Financial Statement

Now, let’s move on to analyzing financial statements. To illustrate this, we’ll take a look at
ANNAM Bank's financial statements for the previous year. This will help us understand key
financial ra7os and how they reflect the bank’s financial health."

Balance Sheet Summary

"First, we have the balance sheet. ANNAM Bank had total assets of $500 billion. A significant
por7on—60% of total assets—was made up of loans and advances. On the liability side,
deposits accounted for 70% of the total liabili7es, with shareholders' equity standing at $50
billion, represen7ng the bank’s net assets aier all liabili7es.
One key ra7o we can derive here is the loan-to-deposit ra1o. For ANNAM Bank, this ra7o was
85%. This means the bank relied heavily on loans to fund its opera7ons. While a higher ra7o can
be risky, ANNAM Bank’s loans were performing well, as seen in its low non-performing loan
levels."

Income Statement Summary

"Next, let’s look at the income statement. ANNAM Bank reported a net interest income of $10
billion, non-interest income of $3 billion, and opera7ng expenses of $7 billion. The net income
for the year came in at $6 billion.
From this, we can calculate the net interest margin, which for ANNAM Bank was 2%. This
indicates that the bank was effec7vely genera7ng income from its assets, thanks to its ability to
maintain a healthy spread between interest charged on loans and interest paid on deposits."

Statement of Cash Flows Summary

"Moving on to the statement of cash flows, ANNAM Bank had $15 billion in net cash provided
by opera7ng ac7vi7es, $10 billion used in inves7ng ac7vi7es, and $5 billion used in financing
ac7vi7es. The bank saw a net increase of $3 billion in cash and cash equivalents over the year.
From this statement, we can calculate the cash conversion cycle, which for ANNAM Bank was
60 days. This shows that the bank was efficient in conver7ng its assets into cash, primarily due
to its quick collec7on of loans and advances."

Statement of Changes in Shareholders’ Equity Summary

"Lastly, in the statement of changes in shareholders' equity, we can see that the bank
generated $6 billion in net income and paid out $3 billion in dividends. The remaining $3 billion
was added to retained earnings, bringing total shareholders' equity to $50 billion by year-end.
One important ra7o here is return on equity (ROE), which for ANNAM Bank was 12%. This
indicates the bank's ability to generate a healthy return for its shareholders, driven by its strong
interest margin and efficient opera7ons."

4. Real- life materials : Audit Reports and Independence in Financial Repor1ng

Now, let’s move on to an essen7al element of financial repor7ng: Audit reports and
independence in financial repor7ng ensure the accuracy and transparency of financial
statements. Independent audits provide objec7ve evalua7ons, building trust among
stakeholders like investors and regulators. This independence prevents conflicts of interest and
biased repor7ng, fostering confidence in financial markets and contribu7ng to economic
stability.
- Audit Reports: Auditors evaluate financial statements to ensure they are fair and comply
with accoun7ng standards. A clean audit opinion indicates that the company’s financial
statements are reliable and free from material misstatements.
- Independence in Financial Repor7ng: An auditor must maintain independence from the
company they are audi7ng. This ensures that the audit is objec7ve and unbiased. Any
conflicts of interest could compromise the integrity of the report, misleading investors
and stakeholders.

EXAMPLE : PwC and Evergrande In September 2023, PwC was banned from prac7cing in China
for six months and fined 441 million yuan (about $62 million) for viola7ons during the audit of
Evergrande Group. Chinese financial authori7es stated that PwC knew about significant errors in
the audits from 2018 to 2020 but concealed them, leading to financial reports that did not
reflect Evergrande's true financial condi7on.

[Slide 11: Conclusion]

Speaker:
"In conclusion, the financial statements of ANNAM Bank show a solid financial posi7on. Despite
a high loan-to-deposit ra7o, the bank’s loans were performing well, and its financial ra7os,
including net interest margin, cash conversion cycle, and return on equity, suggest it is opera7ng
efficiently and profitably."
"Understanding financial statements and the key ra7os derived from them is crucial in assessing
the overall health of an organiza7on. These principles and analyses provide the transparency
and insight needed for informed decision-making."
5. Mini games
6. Câu hỏi phụ
Ques1on 1: What is the primary difference between financial accoun1ng and managerial
accoun1ng?
Answer: The main difference is that financial accoun1ng focuses on preparing financial
statements for external stakeholders, such as investors, creditors, and regulators, to provide an
overview of a company’s financial health. On the other hand, managerial accoun1ng provides
financial informa7on to internal management for decision-making, planning, and control,
helping them make informed business decisions.

Ques1on 2: How do GAAP and IFRS differ in terms of accoun1ng standards?

Answer: GAAP (Generally Accepted Accoun1ng Principles) is primarily used in the United
States, while IFRS (Interna1onal Financial Repor1ng Standards) is adopted by most other
countries. The key difference lies in the approach: GAAP is more rules-based, offering detailed
guidelines, while IFRS is principles-based, allowing for more professional judgment in financial
repor7ng.

Ques1on 3: What does the loan-to-deposit ra1o indicate about a bank’s financial health?
Answer: The loan-to-deposit ra1o measures the propor7on of a bank’s loans compared to its
deposits. A higher ra7o, such as 85% for ANNAM Bank, suggests that the bank relies heavily on
loans to fund its opera7ons. While this can be risky if the loans underperform, a low level of
non-performing loans, as seen with ANNAM Bank, indicates that the bank's loans are
performing well and it is managing its risk effec7vely.

Ques1on 4: Why is the net interest margin an important metric for banks like ANNAM Bank?
Answer: The net interest margin is an important metric as it shows the difference between the
interest income generated from loans and the interest paid on deposits. For ANNAM Bank, a
net interest margin of 2% indicates that the bank is effec7vely genera7ng income from its
assets. A healthy net interest margin helps the bank remain profitable and shows it is managing
its lending and deposit opera7ons well.