Thông tư 210/2009/TT-BTC

CIRCULAR

GUIDING THE APPLICATION OF INTERNATIONAL ACCOUNTING STANDARDS ON PRESENTATION OF FINANCIAL STATEMENTS AND DISCLOSURES OF FINANCIAL INSTRUMENTS

Pursuant to the June 17, 2007 Accounting Law;
Pursuant to the Government's Decree No. 129/2004/ND-CP of December 31, 2004, detailing and guiding a number of articles of the Accounting Law regarding business activities;
Pursuant to the Government's Decree No. 118/2008/ND-CPof November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
The Ministry of Finance guides the application of international accounting standards on presentation of financial statements and disclosures of financial instruments in Vietnam as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of application

This Circular guides the application of international accounting standards on presentation of financial statements and disclosures of financial instruments and applies to all entities in all domains and of all economic sectors in Vietnam that conduct transactions related to financial instruments.

Article 2. Bases for application

The contents to be guided in this Circular are based on international accounting standards and international financial reporting standards promulgated and published in 2007 by the International Accounting Standards Committee.

Article 3. Applicable terms

The terms referred to in International Accounting Standard 32 - Presentation of financial instruments (IAS 32) and International Financial Reporting Standard 07 - Disclosures of financial instruments (IFRS 07) shall be applied in this Circular as follows:

1. Finance instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

2. Financial asset is any asset that is:

a/ Cash:

b/ An equity instrument of another entity;

c/ A contractual right:

(i) To receive cash or another financial asset from another entity; or.

(ii) To exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity;

d/ A contract that will or may be settled in the entity's own equity instruments.

3. Financial liability is any liability that is:

a/ A contractual obligation:

(i) To deliver cash or another financial asset to another entity;

(ii) To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity; or,

b/A contract that will or may be settled in the entity's own equity instruments.

4. Equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

5. Derivative financial instrument is a financial instrument or a contract that concurrently satisfies the following three conditions:

a/ Having its value changed upon a change in interest rate, financial instrument price, goods price, exchange rate, price index or interest rate, credit ranking or index, or other indexes provided that in case these other indexes are non-financial variable numbers, such numbers are not associated with contractual parties (also referred to as basic variable numbers);

b/ Not requiring initial net investment or requiring initial net investment lower than that required by contracts of other types with similar reactions to the change of market factors; and,

c/ Being settled at a certain future date.

6. Financial asset or financial liability recognized at fair value through profit or loss statements is a financial asset or a financial liability
that satisfies either of the following conditions:

a/ Being classified as held for trading. A financial asset or financial liability will be classified as securities held for trading if:

(i) It is purchased or created mainly for the purpose of resale/redemption in a short term;

(ii) There is an evidence that such instrument is traded for the purpose of gaining short-term profits; or,

(iii) It is a derivative financial instrument (except derivative financial instruments identified as financial guarantee contracts or effective hedging instruments).

b/ Upon initial recognition, the entity categorizes the financial asset or financial liability as such reflected at fair value through profit or loss statement.

7. Held-to-maturity investments are non-derivative financial assets with fixed or identifiable payments and fixed maturity periods which an entity has the intent and ability to hold until the date of maturity, with the exceptions of:

a/ Financial assets that, upon initial recognition, were categorized as such recognized at fair value through profit or loss statements;

b/ Financial assets already categorized as available for sale;

c/ Financial assets that meet the definitions of loans and receivables.

An entity may not classify any financial assets as held to maturity if in the current fiscal year or two preceding fiscal years it sold or reclassified before maturity a quantity of assets larger than the insignificant level, unless:

(i) The financial assets were sold or reclassified so near the time of maturity (3 months at most before that time) that the change in the market interest rate did not much affect the fair value of these assets;

(ii) They were sold or reclassified after the entity had collected almost principals of financial assets according to payment schedule or they were settled in advance;

(iii) Such sale or reclassification is not repeated and is unpredictable for a special reason in separate cases beyond the entity's control.

8. Loans and receivables are non-derivative financial assets with fixed or identifiable payments and not listed on the market, with the exceptions of:

a/ The amounts the entity has the intent to immediately sell or will sell in a near future which are classified as assets held for trading, and like those which, upon initial recognition, the entity categorized as such recognized at fair, value through profit or loss statements;

b/ The amounts categorized by the entity as available for sale upon initial recognition; or,

c/ The amounts whose holders cannot recover most of the initial investment value not due to credit quality impairment and which are categorized as available for sale.

9. Available-for-sale assets are non-derivative financial assets determined as available for sale or not classified as:

a/ Loans and receivables;

b/ Held-to-maturity investments;

c/ Financial assets recognized at fair value through profit or loss statements.

10. Financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

11. Amortized cost of a financial asset or financial liability is determined as equaling the initially recognized value of that financial asset or financial liability minus principals, plus or minus accrued amortizations calculated by the effective interest method of the difference between the initially recorded value and the value upon maturity, minus deductions (directly or through a contingency account) due to impairment or irrecoverability.

12. Actual interest method is a method of calculating the amortized cost of one or a group of financial assets or financial liabilities and distributing profit incomes or expenses in the associated period. Effective interest rate is discount interest rate of cash flows forecast to be settled or obtained in the future throughout the expected life cycle of a financial instrument or in a shorter period, when necessary, to return to the current net carrying amount of a financial asset or financial liability.

13. Derecognition is the exclusion of a previously recognized financial asset or financial liability from the balance sheet.

14. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable and willing parties in an arm's length transaction.

15. Ordinary trading transaction is the purchase or sale of a financial asset under a contract the terms of which require the transfer of the asset in a specified duration according to law or market practice.

16. Transaction expenses are arising expenses directly related to the purchase, issue or liquidation of a financial asset or a financial liability. These expenses will not arise if the entity does not purchase, issue or liquidate such financial instrument.

17. Certain commitment is a binding agreement for exchanging specific resources at a specified price at a specific future time.

18. Forecast transaction is a transaction which is not a certain commitment but is a probable forecast transaction.

19. Hedging instrument is a derivative instrument or a non-derivative financial asset or financial liability which is determined (only for hedging risks from exchange rate fluctuations) to have a fair value or cash flows forecast to offset changes in the fair value or cash flows of hedged items.

20. Hedged items include assets, liabilities, certain commitments and transactions forecast to highly probably happen in the future or net investments in foreign operations for which (a) an entity must bear risks from changes in the fair value or future cash flows and (b) which have been determined as being hedged.

21. Hedge effectiveness is the extent of changes in the fair value or cash flows (attributable to hedged risks) of hedged items, which are offset against changes in the fair value or cash flows of hedging instruments.

Chapter II

PROVISIONS ON APPLICATION OF INTERNATIONAL ACCOUNTING STANDARD 32 "FINANCIAL INSTRUMENTS - PRESENTATION"

Article 4. Objective of application

The application of International Accounting Standard 32 (IAS 32) aims to establish principles for presenting financial instruments in financial statements.

Article 5. Scope of regulation

1. This Circular applies to all entities and all financial instruments, with the exceptions of:

a/ Investments in and benefits from subsidiaries, joint ventures and associates in compliance with Vietnam Accounting Standard 07 - Accounting of investments in associates; Vietnam Accounting Standard 08 - Financial information on capital portions contributed to joint ventures; and Vietnam Accounting Standard 25 - Consolidated financial statements and accounting of investments in subsidiaries.

b/ Rights and obligations of employers.

c/ Agreements on contingent items in business consolidated transactions with regard to the purchaser according to Vietnam Accounting Standard 11 - Business consolidation.

d/ Insurance contracts according to Vietnam Accounting Standard 19 - Insurance contract. However, this Circular applies to insurance service providers if derivative financial instruments accompanied with insurance contracts are accounted separately from insurance contracts.

e/ Financial instruments governed by Vietnam Accounting Standard 19 - Insurance contracts for the reason that these financial instruments are partially not guaranteed.

f/ Financial instruments, contracts and obligations of transactions settled in shares.

2. This Circular applies to contracts to purchase or sell a non-financial item that can be settled net in cash or another financial instrument or settled through exchanging financial instruments.

3. This Circular applies to contracts on the option to purchase or sell a non-financial item that can be settled net in cash or another financial instrument or settled through exchanging financial instruments.

Article 6. Presentation of financial liabilities and equity instruments

1. The issuer of a financial instrument shall classify this instrument or its components upon initial recognition as a financial liability or an equity instrument in suitability to the nature and definition of financial liability or equity instrument.

2. A financial instrument shall be presented by the issuer as an equity instrument when such financial instrument does not cover a contractual obligation to deliver cash or another financial asset to another entity or exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the issuer. Financial instruments other than equity instruments shall be presented by the issuer as liabilities.

3. Preferred shares shall be presented as financial liabilities if there is a term requiring the issuer to redeem a specified number of preferred shares at a specified future time.

Article 7. Presentation of contingent settlement provisions

A financial instrument may require the entity to deliver cash or another financial asset, in the event of the occurrence or non-occurrence of uncertain future events that are beyond the control of both the issuer and the holder of the instrument, which is presented as the issuer's financial liability.

Article 8. Presentation of the settlement option

A derivative financial instrument is the option to be presented as a financial asset or a financial liability.

Article 9. Presentation of compound financial instruments

1. The issuer of a non-derivative financial instrument shall evaluate the terms of the financial instrument to determine whether it contains both a liability and an equity component. The identification of components of a compound financial instrument shall be based on the entity's liability (financial liability) created from the financial instrument and the holder's right for converting it into an equity instrument. For example, a convertible bond may be converted into an ordinary share as a compound financial instrument, consisting of two components: financial liability (compulsory agreement on payment in cash or another financial asset) and equity instrument (the right to be converted into a share within a specified period).

2. The component classified as financial liability in a compound financial instrument shall be presented separately from the component classified as financial asset or equity in the balance sheet.

3. The initial carrying amount of a compound financial instrument shall be amortized for liability and equity components. The equity component is determined as the residual value of the financial instrument after deducting the fair value of the liability component. The value of a derivative instrument (such as contract on sale option) accompanied with a compound financial instrument and not belonging to the equity component (such as the option to convert the equity) shall be presented in the liability component. The total carrying amount of liability and equity components upon initial recognition always equals the fair value of financial instruments.

Article 10. Presentation of fund shares

Fund shares shall be presented in a separate item as an equity reduction. An entity shall recognize no gain or loss on the purchase, sale, issue or cancellation of fund shares. The amount to be obtained or settled shall be recognized directly in equity.

Article 11. Presentation of interests, dividends, losses and gains

1. Interests, dividends, profits, losses and gains relating to a financial instrument or a component that is a financial liability shall be recognized as income or expense in the loss or profit statement. Dividends or profits to be settled to shareholders shall be debited directly to equity. In case a preferred share is classified as a liability, the dividend of such preferred share payable to shareholders shall be recognized in expenses in the period.

2. Transaction costs relating to the issue of a compound financial instrument shall be amortized in proportion for liability and equity components of such instrument. Transaction costs relating to different transactions shall be amortized for such transactions in proportion. Transaction costs shall be accounted for as a deduction from equity in the reporting period.

3. Gains and losses resulting from changes in the carrying amount of financial liabilities shall be recognized as incomes or expenses in the profit or loss statement.

Article 12. Offsetting of financial assets and financial liabilities in balance sheets

A financial asset and a financial liability shall be offset for each other in the balance sheet when, and only when, an entity:

a/ Has a legally enforceable right 10 offset the recognized amounts: and.

b/ Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Chapter III

PROVISIONS ON APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARD 07 "FINANCIAL INSTRUMENTS: DISCLOSURES"

Article 13. Objective of application

The application of International Financial Reporting Standard 07 (IFRS07) under this Circular aims to guide disclosures of financial instruments to enable users of financial statements to evaluate the significance of financial instruments to the financial position and profit or loss of an entity and to evaluate the nature and extent of risks arising from financial instruments and evaluate how the entity manages risks.

Article 14. Scope of regulation

This Circular applies to all entities and all financial instruments, with the exceptions of:

1. Investments in and benefits from subsidiaries, joint ventures and associates in compliance with Vietnam Accounting Standard 07 - Accounting of investments in associates; Vietnam Accounting Standard 08 - Financial information on capital portions contributed to joint ventures; and Vietnam Accounting Standard 25 - Consolidated financial statements and accounting of investments in subsidiaries.

2. Rights and obligations of employers.

3. Agreements on contingent items in business consolidated transactions with regard to the purchaser according to Vietnam Accounting Standard 11 - Business consolidation.

4. Insurance contracts according to Vietnam Accounting Standard 19 - Insurance contract. However, this Circular to insurance service providers if derivative financial instruments accompanied with insurance contracts are accounted separately from insurance policies.

5. Financial instruments, contracts and obligations of transactions settled in shares.

Article 15. Categorization of financial instruments and disclosures

Financial instruments shall be categorized in suitability with the nature of presented information and taking into account the characteristics of such financial instruments. An entity shall provide adequate information that permits it to compare with relevant items presented in the balance sheet.

Article 16. Significance of financial instruments to financial position and profit or loss

The entity shall present information enabling users of financial statements to evaluate the significance of financial instruments to its financial position and profit or loss.

Article 17. Presentation of financial assets and financial liabilities

The carrying amount of each class of the following financial assets and financial liabilities shall be presented in the balance sheet or the financial statement disclosure:

1. Financial assets recognized at fair value through profit or loss statements, showing financial assets classified by the entity into this category upon initial recognition separately from financial assets held for trading;

2. Held-to-maturity investments;

3. Loans and receivables;

4. Available-for-sale financial assets;

5. Financial liabilities recognized at fair value through profit or loss statements, showing financial assets classified by the entity into this category upon initial recognition separately from financial assets held for trading;

6. Financial liabilities determined at the amortized cost.

Article 18. Disclosures of financial assets and financial liabilities recognized at fair value through profit or loss statements

1. If an entity classifies a loan or a receivable (or a group of loans or receivables) as that recognized at fair value through profit or loss statements, ii shall disclose:

a/ The maximum exposure to credit risk of the loan or receivable (or the group of loans or receivables) at the reporting date;

b/ The extent of credit risk mitigation of associated credit derivative instruments or similar instruments;

c/ The fair value of the loan or receivable (or the group of loans or receivables) at the end of the period and changes in the fair value in the period attributable to changes in credit risk of financial instruments;

d/ The fair value at the end of the period and changes in the fair value in the period of associated credit derivative financial instruments or similar instruments from the time the loan or receivable is classified into this category.

2. For financial liabilities recognized at fair value through profit or loss statements, an entity shall disclose:

a/ The fair value at the end of the period and changes in the fair value in the period attributable to changes in credit risk of financial liabilities.

b/ The difference between the carrying amount of financial liabilities and the value to be settled by the entity upon maturity under contract to the owners of these liabilities.

Article 19. Disclosure of reclassification

When reclassifying financial instruments, an entity shall disclose the value of reclassified financial instruments, causes and effects of such reclassification to financial statements.

Article 20. Disclosure of derecognition

When transferring financial assets unqualified for derecognition, for each class of financial asset, an entity shall disclose:

1. The nature of the asset;

2. The nature of the transfer of risks and ownership;

3. The carrying amounts of the assets and of associated liabilities if the entity continues to recognize the whole of these assets; and.

4. When the entity continues to recognize the assets to the extent of its continuing involvement, the carrying amount of the original assets, the amount of the assets that the entity continues to recognize, and the carrying amount of the associated liabilities.

Article 21. Disclosure of collateral

1. For collateral, an entity shall disclose:

a/ The carrying amount of financial assets it has pledged as collateral for liabilities or contingent debts, including amounts that have been reclassified; and.

b/ The terms and conditions relating to its pledge.

2. When the entity holds collateral (of financial or non-financial assets) and is permitted to sell or re-pledge the collateral for a third party in the absence of default by the owner of the collateral, it shall disclose:

a/ The fair value of the collateral;

b/ The fair value of such collateral sold or re-pledged for a third party, and whether the entity has an obligation to return it; and.

c/ The terms and conditions associated with the use of the collateral.

Article 22. Allowance amount for credit losses

When financial assets are impaired by credit losses and the entity records the impairment in a separate account (e.g., an allowance account used to record individual impairments or a similar account used to record a collective impairment of assets) rather than directly reducing the carrying amount of the asset, it shall disclose a reconciliation of changes in that account during the period for each class of financial assets.

Article 23. Disclosure of compound financial instruments with multiple embedded derivatives

If an entity has issued an instrument that contains both a liability and an equity component and the instrument has multiple embedded derivatives whose values are interdependent (such as a callable convertible debt instrument), it shall disclose the existence of those features.

Article 24. Disclosure of defaults and breaches

For loans payable recognized at the reporting date, an entity shall disclose:

1. Details of defaults (if any) during the period of principals and interests of those loans payable;

2. The carrying amount of the loans payable in default at the reporting date; and,

3. Whether the default was remedied, or the terms of the loans payable were renegotiated, before the financial statements were authorized for issue.

Article 25. Disclosure of items of income, expense, gains or losses

An entity shall disclose the following items of income, expense, gains or losses either in profit or loss statements or in financial statements:

1. Net gains or net losses on:

a/ Financial assets or financial liabilities at fair value through profit or loss statements, showing separately those on financial assets or financial liabilities designated as such upon initial recognition, and those on financial assets or financial liabilities held for trading;

b/ Available-for-sale financial assets; showing separately the amount of gain or loss recognized directly in income during the period and the amount removed from equity and recognized in income for the period;

c/ Held-to-maturity investments;

d/ Loans and receivables; and.

e/ Financial liabilities determined at the amortized cost.

2. Total interest income and total interest expense (calculated using the effective interest method) for financial assets or financial liabilities that are not at fair value through profit or loss statements.

3. Fee income and expense (other than amounts included in determining the effective interest rate) arising from:

a/ Financial assets or financial liabilities that are not at fair value through profit or loss statements; and,

b/ Other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and other institutions.

4. Interest income on impaired financial assets accrued.

5. The amount of any impairment loss for each class of financial asset.

Article 26. Presentation of accounting policies

An entity shall present, in the summary of significant accounting policies, the measurement basis (or bases) used in preparing the financial statements and other relevant accounting policies.

Article 27. Disclosure of hedges

1. An entity shall disclose the following separately for each type of hedge: fair value hedge; cash How hedge; and hedge for net investments in foreign operations. Specifically:

a/ A description of each type of hedge;

b/ A description of the financial instruments designated as hedging instruments and their fair values at the reporting date; and.

c/ The nature of the risks being hedged.

2. For cash flow hedges, an entity shall also disclose:

a/ The periods when the cash flows are expected to occur and when they are expected to affect profit or loss;

b/ A description of any forecast transactions for which hedge accounting has previously been used, but which is no longer expected to occur;

c/ The amount that was recognized in equity during the period;

d/ The amount that was removed from equity and included in profit or loss statements for the period, showing the amount included in each line item in the profit or loss statement; and,

e/ The amount that was removed from equity during the period and included in the initial cost or carrying amount of a non-financial asset or a liability whose acquisition or incurrence was a hedged highly probable forecast transaction.

3. An entity shall also disclose separately:

a/ In fair value hedges: gains or losses of hedging instruments and hedged items attributable to hedged risks.

b/ The ineffectiveness recognized in profit or loss statements that arises from cash flow hedges; and.

c/ The effectiveness recognized in profit or loss statements that arises from hedges of net investments in foreign operations.

Article 28. Disclosure of fair value

An entity shall disclose:

1. Fair value of financial assets and liabilities in a way that permits it to be compared with its carrying amount.

2. The methods of determining fair value of each class of financial assets or financial liabilities.

Article 29. Qualitative disclosures

For each type of risk arising from financial instruments, an entity shall disclose:

1. The exposures to risk and how they arise;

2. Its objectives, policies and processes for managing the risk and the methods to measure the risk; and,

3. Any changes in the exposures to risk and how they arise or its objectives, policies and processes for managing the risk and the methods to measure the risk from the previous period.

Article 30. Quantitative disclosures

For each type of risk arising from financial instruments, an entity shall disclose summary quantitative data about its exposure to risk at the reporting date.

Article 31. Disclosure of credit risk

1. An entity shall disclose by class of financial instrument:

a/ The amount that best represents its maximum exposure to credit risk at the reporting date without taking account of any collateral held or other credit enhancements;

b/ A description of collateral held as security and other credit enhancements;

c/ Information about the credit quality of financial assets that are neither past due nor impaired; and,

d/ The carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated.

2. For financial assets that are past due or impaired, an entity shall disclose:

a/ An analysis of the age of financial assets that are past due as at the reporting date but not impaired;

b/ An analysis of financial assets that are individually determined to be impaired as at the reporting date, including the factors the entity considered in determining that they are impaired; and,

c/ A description of collateral held by the entity as security and an estimate of its fair value.

3. For collateral and credit enhancements obtained, an entity shall disclose:

a/ The nature and carrying amount of the assets obtained; and,

b/ When the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations.

Article 32. Disclosure of liquidity risk

An entity shall disclose:

1. A maturity analysis for financial liabilities that shows the remaining contractual maturities; and.

2. A description of how it manages the inherent liquidity risk.

Article 33. Disclosure of market risk

An entity shall disclose a sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date: the methods and assumptions used in preparing the sensitivity analysis, and changes from the previous period in the methods and assumptions used, and the reasons for such changes.

Chapter IV

ORGANIZATION OF IMPLEMENTATION

Article 34. Effect

This Circular takes effect 45 days from the date of its signing and is applicable for presenting and disclosing financial instruments in financial statements from 2011 onwards.-