VinFast Auto discloses restatement of 2023 audited financial statements resulting from internal review and accounting reclassification (4.13)
On July 29, 2024, the management of VinFast and the co's board of directors and audit committee concluded that the co's previously-issued (i) consolidated financial statements as of and for the year ended December 31, 2023 prepared in conformity with accounting principles generally accepted in the United States of America, and associated report of Ernst & Young Vietnam Limited ("Ernst & Young Vietnam"), the co's independent registered public accounting firm, (ii) unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024, and (iii) press releases, earnings releases, and investor communications describing the co's financial performance for the year and period then ended, should no longer be relied upon because the Company expects to restate the aforementioned financial statements and financial information for the relevant reporting periods due to the following accounting errors that the Company has identified:
- The sale of 454 EVs and 2,192 e-scooters to its affiliate, GSM Green and Smart Mobility Joint Stock Company ("GSM") were invoiced in fiscal year 2023. However, a regular internal review by the Company identified that the dispatching of these EVs and e-scooters for delivery began in early 2024, and therefore these sales should not have been recognized as revenue in 2023. Accordingly, the co's revenue for fiscal year 2023 was overstated by ~$17.2 million.
- The Company sold 205 EVs to an unrelated third party in Vietnam in 2023 and recognized revenue from those sales for fiscal year 2023. A regular internal review by the Company has identified that a majority of these EVs were returned to the Company in February 2024 for a software update and re-delivered to customers between April and June 2024. Under these circumstances and the delivery terms of the co's sales agreements, revenue for these sales should not have been recorded in fiscal year 2023 because risk and control of these EVs had not been fully transferred to the customers as of December 31, 2023. Accordingly, the co's revenue for fiscal year 2023 was overstated by ~$10.5 million.
Out of the approximate $27.7 million of overstated revenue due to the accounting errors, ~$15.7 million is expected to be recognized in the first quarter of 2024 with substantially all of the remaining amount expected to be recognized in the remainder of 2024. Because the forthcoming restatement will require the Company to make adjustments to revenue-related cut-off items, the Company also intends to record an additional adjustment to revenue for an immaterial and unrecorded audit difference that it is aware of. In June 2023, the Company announced an additional goodwill after-sales policy that provides eligible customers with cash or service vouchers if their vehicles experience a technical issue that requires servicing. The Company recognized expenses in relation to vehicles sold prior to effectiveness of this policy in selling and distribution costs in fiscal year 2023 rather than as a reduction to revenue. As the after-sales expenses policy is tied to previously recognized revenue and current customer agreements, the support provided qualifies as "Consideration payable to a customer" and should have been recorded as a reduction to revenue during fiscal year 2023. Accordingly, the Company will reclassify ~$6.1 million from selling and distribution costs to a reduction to revenue. There will be no impact to net loss for the fiscal year 2023 arising from this reclassification. Due to the foregoing factors, the co's revenue, selling and distribution costs and net loss for fiscal year 2023 were overstated by ~$33.9 million (~2.8% of its previously reported total revenue), $6.1 million, and $1.8 million, respectively.