Grant Thornton Vietnam expert: circular 99 marks a turning point in initial accounting, but is a necessary change

From the start of 2026, the application of Circular 99/2025/TT-BTC is forcing enterprises to change how revenue is recognized based on the substance of the transaction rather than cash flow. The shift is expected to create significant fluctuations in accounting profits, particularly for industrial park, real estate and infrastructure sectors where upfront cash collection and long-term contracts are common.

Circular 99/2025/TT-BTC, issued by the Ministry of Finance to guide the corporate accounting regime, took effect in early 2026 and introduces wide-ranging changes in revenue and profit recognition. For companies in industrial parks, real estate and infrastructure, the impact is especially pronounced.

“Accounting shock” in early periods

Grant Thornton (Vietnam) Director of Enterprise Solutions Nguyen Cong Vinh said Circular 99 requires revenue to be recognized when the obligation to supply goods or services is performed, instead of being recognized based on cash inflows or the timing of cash receipts as was common previously.

Mr. Vinh noted that this can create a temporary divergence between accounting profits and actual cash flow. The effect is most visible for enterprises that collect cash upfront across multiple periods, such as land leases in industrial parks, infrastructure real estate and long-term contracts.

“When cash is collected upfront but the obligation to provide service is not yet fulfilled, accounting revenue must be allocated gradually over each period, rather than recognizing all at once as before,” Mr. Vinh said.

As a result, accounting profits in the initial periods may fall significantly even if operating cash flow remains unchanged. Mr. Vinh described this as a technical accounting impact that does not necessarily reflect a decline in business efficiency or cash-generating ability.

He added that allocating revenue according to the timing of performance obligations helps financial statements reflect the true substance of business activity more accurately and aligns more closely with international accounting practices.

Compressed implementation timeline

Beyond the numerical impact, Mr. Vinh highlighted a major challenge: the compressed timing for issuing and implementing Circular 99. Accounting teams—especially in industrial parks and infrastructure real estate—must rapidly update and correctly apply the new principles, replacing accounting habits formed and used for more than a decade.

Separating multi-component contracts into performance obligations

One of Circular 99’s core changes is the requirement to separate multi-component contracts into separate performance obligations. For industrial park and infrastructure real estate firms, this is common when contracts include long-term land rent, infrastructure fees and operating services.

According to Mr. Vinh, separating obligations allows financial statements to reflect the transaction’s substance more clearly, enabling readers to distinguish between transferring the right to use an asset and providing services over time. However, the approach also increases complexity because contract value must be allocated to each obligation.

In practice, not every contract component has an independent sale price. In such cases, enterprises must use accounting estimates based on assumptions of fair value or economic contribution. Differences in these assumptions can lead to uneven allocation outcomes across enterprises, reducing comparability of financial statements within the same industry. This can make it more difficult for investors, banks and other stakeholders to evaluate performance across firms.

Mr. Vinh said the challenge is not the regulation itself but the judgment capability and quality of implementation. Enterprises need to build clear accounting policies grounded in sound economic rationale, applied consistently and transparently in the notes to ensure data reliability.

Profit figures vs. financial communication

Mr. Vinh said some enterprises may proactively set lower profit targets as a cautious way to manage market expectations. However, without full explanation, such adjustments can be misinterpreted as a sign of weakening business activity.

He emphasized that the key issue is not the profit number alone, but how the company explains the change. If the company does not clarify that the movement is driven by technical impacts from accounting standards, the market may interpret it as deterioration in value-creating ability.

“In a context where standards increasingly rely on principles and professional judgment, accounting cannot be separated from financial communication. A major shift in revenue recognition needs to be embedded in a consistent explanatory narrative, with clear data illustrating the cause, the scope of impact and whether the impact is temporary or long-term,” Mr. Vinh said.

Potential effects on capital access and credit indicators

Mr. Vinh also noted that accounting profit declines while cash flow remains unchanged can negatively affect certain short-term financial indicators such as ROE, gross margin, or the ability to meet financial covenants in loan agreements. These indicators are typically calculated using accounting profits, making them sensitive to changes under the new standards.

However, he said credit institutions and professional investors still prioritize cash flow and long-term cash-generating ability. Profit declines caused by changes in revenue recognition do not automatically imply credit risk or deterioration in business quality.

Still, misinterpretation risk remains if companies do not provide clear explanations, potentially leading lenders or investors to misjudge risk and causing unnecessary impacts on credit ratings, covenants or cost of capital.

To address this, Mr. Vinh suggested companies actively engage with banks to revise covenants—shifting the focus from profit-based indicators to cash flow and liquidity indicators—so that covenant compliance better reflects actual financial health.

Higher audit risk in the first years

From an auditing perspective, Mr. Vinh assessed that moving to revenue recognition based on performance obligations will increase the risk of material misstatement in the early years. Key risks include correctly identifying obligations, determining the timing of completion and allocating contract value to long-term or complex contracts.

He said sectors with significant accounting judgments—such as industrial parks, infrastructure real estate and long-term service contracts—face higher risks due to reliance on accounting estimates and management assumptions, especially in a context with limited long-term precedent for comparison. He added that these risks are mainly transitional rather than systemic.

In practice, risk concentration tends to be in the first 1–3 years after adoption, when firms are establishing policies, adjusting processes and compiling data. After that period, the method becomes more stable with a longer data history, and risk decreases as accounting judgment becomes more consistent.

A necessary transition toward higher-quality reporting

In the long term, Mr. Vinh said Circular 99 is a necessary and foundational step to improve the quality of financial information. It is intended to support decision-making by investors, lenders and other stakeholders based on the substance of business activities and long-term value creation rather than point-in-time indicators.

He added that the standard aims to ensure revenue recognition reflects economic substance rather than legal form, improving transparency and comparability and bringing Vietnam closer to international standards.

Mr. Vinh concluded that the biggest challenge is not the profit number itself, but the adaptability of the accounting system and the ability of enterprises to explain changes to stakeholders. He said the transition should be approached proactively and strategically, including reviewing contract structures, standardizing accounting policies, upgrading systems to track obligations and increasing communication with stakeholders.

Example: Sonadezi Chau Duc (SZC)

The case of Sonadezi Chau Duc (HOSE: SZC) was cited as a typical example. After reporting record profits over the previous year, SZC set its 2026 profit target at just over VND 56 billion—an 84% decline and the lowest in nine years. The explanation provided is that the change is mainly driven by the new revenue recognition method under Circular 99 rather than a decline in business activity.