Thông tư 133/2016/TT-BTC

CIRCULAR

ACCOUNTING FOR SMALL AND MEDIUM ENTERPRISES

Pursuant to the Law on Accounting No. 88/2015/QH13 dated November 20, 2015;

Pursuant to the Government's Decree No. 215/2013/ND-CP dated December 23, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Finance;

At the request of Director of Department of Audit and Accounting,

The Minister of Finance promulgates a Circular on accounting for small and medium enterprises

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Circular provides instructions on bookkeeping, preparation of financial statements of small and medium enterprises (SME) and does not apply to determination of enterprises’ tax liability.

Article 2. Regulated entities

1. This Circular apply to SME, including extra-small enterprises, in every field and every economic sector defined by law on assistance for SME, except for state-owned enterprises, enterprises over 50% charter capital of which are held by the State, public companies defined by securities laws, cooperatives and cooperative associations defied by the Law on Cooperatives.

2. SME in special fields such as electricity, petroleum, insurance, securities, etc. whose special accounting policies are promulgated or approved by the Ministry of Finance.

Article 3. General rules

1. SME may apply the accounting policies specified in Circular No. 200/2014/TT-BTC dated December 22, 2014 of the Ministry of Finance and amendments thereto as long as their supervisory tax authorities are informed and such accounting policies are applied consistently throughout the fiscal year. A SME that wishes to turn back to applying the accounting policies specified this Circular must do it in the beginning of the fiscal year and inform its supervisory tax authority.

2. SME shall, pursuant to accounting rules and contents of the balance sheet specified in this Circular, record their transactions in a way that is appropriate for their operation and management requirements.

3. In the cases where an enterprise undergoes changes in a fiscal year and is no longer regulated by this Circular, it may apply this Circular until the end of the current fiscal year and apply an appropriate accounting policy from the succeeding fiscal year.

Article 4. Application of accounting standards

SME shall apply the accounting policy specified in this Circular and relevant Vietnam’s accounting standards, except:

Article 5. Accounting currency

The accounting currency is Vietnamese Dong (national symbol: “đ”; international symbol: “VND”) shall be used to prepare the accounting books and financial statements of enterprises. In the cases where most of an accounting unit’s revenues and expenses are foreign currencies and the standards specified in Article 6 of this Circular are met, one of the foreign currencies may be used as accounting currency.

Article 6. Selection of accounting currency

1. An enterprise whose revenues and expenses are primarily in foreign currencies may decide on an accounting currency pursuant to the Law on Accounting and take legal responsibility for such selection. The supervisory tax authority of such enterprise must be informed of this decision.

2. An accounting currency:

a) is primarily used in the unit’s goods sale and/or service provision; greatly affects the prices for goods and/or services; is usually the currency of selling prices and payments therefor; and

b) is primarily used in the unit’s purchases of goods and/or services; greatly affects the costs of labour, materials and other operating expenses; is usually the currency of payments for such costs.

3. The following factors are also taken into account and used as evidence for the unit’s accounting currency:

a) The currencies for raising financial resources (such as issuance of shares, bonds);

b) The currencies obtained from business operations and accrued.

4. The accounting currency reflects the transactions, events and conditions related to the unit’s operation. Once determined, the accounting unit must not be changed unless in the case of vital change to such transactions, events and conditions.

Article 7. Conversion of financial statements into VND

1. In the cases where an enterprise uses a currency other than VND as its accounting currency, the currency in the financial statement that is published and submitted to Vietnamese competent authorities must be VND. If the enterprise has to have its financial statement audited, the financial statement submitted to the regulatory body and published must undergo audit.

2. The conversion of financial statement currencies into VND is specified in Article 78 of this Circular.

3. When converting the currency of a financial statement into VND, the enterprise must specify the impacts (if any) to the financial statement because of such conversion in the notes to the financial statement.

Article 8. Change of accounting currency

In case of major changes to the management and business operation that render the current accounting currency unable to meet the standards specified in Clause 2 and Clause 3 of Article 6 hereof, the enterprise may change its accounting currency. The accounting currency may only be changed at the beginning of a new accounting period.

The enterprise must inform its supervisory tax authority of the change of its accounting currency within 30 working days from the day on which such change is made.

Article 9. Rights and responsibility of enterprises to the bookkeeping of its affiliated units.

1. The enterprise shall organize the accounting apparatus of its affiliated units without legal status (hereinafter referred to as affiliated units) in a way that is appropriate for its operation and conformable with law.

2. The enterprise shall decide whether an affiliated unit keeps separate accounts of the following:

a) Regarding capital provided by the enterprise: the enterprise shall decide whether it is recorded as a liability or equity;

b) Regarding purchases, sales, internal circulation of products, goods and/or services, the enterprise shall decide the recording of revenues, costs at each affiliated unit, regardless of the form of accounting documents (internally circulated vouchers or invoices)

In the cases where the internal circulation of goods/services creates value added to the products, goods and/or services, the enterprise should record the revenues and costs at its affiliated units.

c) Depending on the accounting model, the enterprise may authorize its affiliated units to record undistributed after-tax profit or only record revenues and expenses.

Article 10. Registration of changes to accounting policy

1. Regarding the balance sheet:

a) In the cases where an enterprise wishes to add a sub-account or change the name, symbol, contents, transaction accounting method of a sub-account, it must obtain a written approval by the Ministry of Finance.

b) An enterprise may add sub-accounts account to accounts without sub-accounts specified in the Enterprise Account System in Appendix 1 enclosed herewith without approval by the Ministry of Finance.

2. Regarding financial statements:

a) An SME shall prepare its financial statement using the template in Appendix 2 enclosed herewith in a way that is appropriate for its business operation.

b) Addition or change to any item of the financial statement is subject to written approval by the Ministry of Finance.

3. Regarding accounting books and accounting documents:

a) Each enterprise may design its own accounting documents that are suitable for its operation as long as primary content and compulsory information specified by technical defects and its instructional documents are sufficient.

b) All accounting book templates (including logs and ledgers) are instructional (not mandatory). Enterprises shall comply with the Law on Accounting and instructional documents thereof. Enterprises may design their own accounting books and tags as long as information is sufficient, clear and easy to inspect.

Chapter II

CHART OF ACCOUNTS

Article 11. Rules for cash accounting

1. The accountant must keep daily records of revenues, expenses, receipt and dispatching of money cash funds or foreign currencies in the Journals and calculate the fund balance and every account in the bank at all times for verification.

2. Deposits paid by other organizations and individuals in the enterprise shall be managed and recorded similarly to the enterprise’s money.

3. The receipt or payment slips with sufficient signatures are required when obtaining receipts or making payments of cash. The debit notes or credit notes or banking statements are required when recording bank deposits.

4. The accountant must keep records of cash in foreign currency in details. When transactions in foreign currencies are made, foreign currencies shall be converted into VND according to the following rules:

- Actual exchange rates shall be applied to the debit side of cash accounts;

- Weighted average exchange rates or actual exchange rates shall be applied to the credit side of cash accounts.

The determination of weighted average exchange rate and actual exchange rate is specified in Article 52 of this Circular.

5. In the cases where the enterprise applies the actual exchange rate to record the money and exchange differences that occur in the period in the credit side of cash accounts, it may record them at the time of payment or on a periodical basis depending on the characteristics of its operation. If at the end of accounting period:

- The cash account balance in foreign currency is empty, the enterprise must aggregate all exchange differences that occur in the period with financial income or financial expense in the period.

- If the cash account balance in foreign currency is positive, the enterprise shall carry out reassessment as specified in Article 52 of this Circular.

6. The foreign currency balance must be reassessed at the time of preparation of the financial statement at the closing average transfer rate of the commercial bank where the enterprise’s transactions are usually made (hereinafter referred to as “the regular bank”).

Determination of the average transfer rate and method for handling exchange difference due to reassessment of foreign currency accounts are specified in Article 52 of this Circular.

Article 12. Account 111 – Cash on hand

1. Rules for accounting

a) This account reflects receipts, expenses, balance in the enterprise’s cash fund, including VND and foreign currencies. Only received, dispatched or stocked VND and foreign currencies shall be recorded to account 111 “Cash”.

b) When receiving or dispatching cash fund, receipt slips, payment slips with signatures of payees, payers and persons authorized to permit such transactions are required. Receiving order and dispatching order must be attached in certain cases.

c) The accountant of cash fund must write a Cash daybook and record all day-to-day financial transactions: receipts, payments, dispatch or receiving of the cash fund and calculate the fund balance at all times.

d) The cashier shall be responsible for management, receiving and dispatch of the cash fund. The cashier must verify the actual cash balance, then collate the figures between cash fund book and cash ledger on a daily basis. In case of any difference, the accountant and the cashier must verify them again in order to uncover reasons and propose solutions for such difference.

2. Structure and contents of Account 111 – Cash

Debit:

- Received VND and foreign currency;

- Excess VND and foreign currency found during stocktaking;

- Exchange rate difference due to reassessment of cash balance in foreign currency at the time of reporting (if foreign currency rate rises against the recorded exchange rate).

Credit:

- Dispatched VND and foreign currency;

- Fund deficiency in VND and foreign currency found during stocktaking;

- Exchange rate difference due to reassessment of cash balance in foreign currency at the time of reporting (if foreign currency rate rises against the recorded exchange rate).

Debit balance:

Stocked cash and foreign currency remained in the cash fund at the reporting time.

Account 111 – Cash, comprising two sub-accounts:

- Account 1111 – VND: reflecting receipts, expenses, balance in VND of the cash fund.

- Account 1112 – Foreign currencies: reflecting receipts, expenses, exchange rate differences and foreign currency balance of the cash fund which is converted into the accounting currency.

Article 13. Account 112 – Cash in bank

1. Rules for accounting

a) This account is intended to record current amounts, increases and decreases in demand deposits of the enterprise in bank accounts. Credit notes, debit notes or bank statements enclosed with original documents (payment order, collection order, depository transfer check, certified check, etc) shall be recorded to Account 112 "Cash in bank".

b) When receiving documents sent from a bank, the accountant must collate them with enclosed original documents. In case of any difference between figures in enterprise's ledger, original documents and in the bank’s documents, the enterprise must request the bank to verify and handle such difference. At the end of the month, if the cause of such difference is not identified, accountants shall record according to the bank's figures stated in debit notes, credit notes or bank's statements. The difference (if any) shall be recorded to Dr 138 “Other receivables” (1381) (if the value recorded by the accountant is larger than that provided by the bank) or recorded to Cr 338 “Other payables” (3381) (if the value recorded by the accountant is smaller than that provided by the bank). In the following month, the investigation into the difference must carry on to adjust the book values.

c) It is required to sort the deposits by account in each bank to facilitate verification.

d) Bank overdrafts must not be recorded as a negative amount on bank deposit accounts. Instead, they shall be recorded similarly to bank loans.

2. Structure and contents of account 112 – Cash in bank

Debit:

- Deposited VND and foreign currencies;

- Exchange rate difference due to reassessment of bank deposit balance in foreign currency at the time of reporting (if foreign currency rate rises against the recorded exchange rate).

Credit:

- Withdrawn VND and foreign currencies;

- Exchange rate difference due to reassessment of bank deposit balance in foreign currency at the time of reporting (if foreign currency rate drops against the recorded exchange rate).

Debit balance:

Actual deposited VND and foreign currencies at the reporting time.

Account 112 – Cash in bank, comprising two sub-accounts:

- Account 1121 – VND: reflecting deposits, withdrawals and bank account balance in VND.

- Account 1122 – Foreign currency: reflecting deposits, withdrawals and bank account balance in foreign currencies converted into the accounting currency.

Article 14. Account 121 - Trading securities

1. Rules for accounting

a) This account is intended to record the sales, purchases and payments of securities held for trading as defined by law (including over-12-month matured securities which are traded for profits). Trading securities include:

- Shares, bonds listed on securities market;

- Securities and other financial instruments.

This account is not used to record the held to maturity investment, such as: loans under agreements, cash in bank, bonds, commercial papers, treasury bills, exchange bills,…held to maturity date.

b) Trading securities must be recorded in the ledger according to their historical cost: buying price plus (+) buying expenses (if any) such as brokerage, transactions, information provision, taxes, bank's fees and charges. The historical cost of trading securities shall be determined according to reasonable prices of payment at the time of transaction. Trading securities shall be recorded when the investor acquires the ownership. To be specific:

- Listed securities are recorded at the time of matching (T+0);

- Unlisted securities are recorded at the time at which the ownership is acquired as prescribed in regulations of law.

c) At the end of the fiscal year, if the market prices of trading securities devalue against their historical costs, the accounting may make provisions for devaluation.

d) The enterprise must promptly fully record incomes from investment in trading securities. When receive investment interests including the investment interests accrued before re-buy that investment, that interests must be allocated. Interest in the periods after the enterprise buys such investment shall be recorded as financial income. The interest accrued before the enterprise repurchases the investment shall be recorded as a decrease in its value.

When the investor receives additional shares without paying money to joint-stock companies using share premium, the funds belong to owners’ equity and unallocated after-tax profits (dividends are allocated by shares) to issue additional shares, the investor only observes the quantity of additional shares according to the presentation of financial statement, not records the received share value, not records financial income and not records the investment value in joint-stock companies.

dd) Before any share is exchanged, its value must be determined according to fair value on the exchanging date. The difference (if any) between fair value of shares received and book value of shares used for exchange shall be recorded to financial income (in case of profit) or financial expenses (in case of loss). The determination of fair value of shares shall comply with regulations below:

- Regarding shares of listed companies, fair value of their shares are closing prices listed on the securities market on the exchange date. In case the securities market closes transaction on the exchange date, the fair value of shares is closing prices of the session preceding the exchange date.

- Regarding unlisted shares permitted to transact on the UPCOM, the fair value of shares are closing prices of UPCOM on the exchange date. In case the UPCOM closes transactions on the exchange date, the fair value of shares is closing prices of the session preceding the exchange date.

- With regard to other unlisted shares, the fair value of shares is prices dealt by contracting parties or book value at the exchange date.

e) The accountant manage trading securities being held by the enterprise by ticker symbol and type (type of securities, face value, actual buying price or each foreign currency used for investment, etc).

g) When liquidating or transferring trading securities (according to each type of security), the cost shall be determined according to weighted mean or “first-in, first-out” rule. The cost of selling securities shall be aggregated with financial expense in the period. The profit earned or loss incurred when liquidating or selling trading securities shall be aggregated with financial income or financial expense in the accounting period.

h) At the end of the fiscal year, the enterprise must reassess all types of trading securities that are foreign currency monetary items at the closing average transfer rate of the enterprise’s regular bank. The determination of the average transfer rate and method for handling exchange difference due to reassessment of trading securities that are foreign currency monetary items are specified in Article 52 of this Circular.

2. Structure and contents of account 121 – Trading securities

Debit: Trading security buying-value.

Credit: trading security selling-value.

Debit balance: Trading security value at the reporting time.

Article 15. Account 128 – Held to maturity investments

1. Rules for accounting

a) This account is used to record current amounts and increases and decreases in held to maturity investments (other than trading securities), such as: term deposits (including treasury bills, promissory notes), bonds, and held to maturity loans to earn profits periodically and other held to maturity investments.

This account does not reflect debt securities held for sales (reflected in account 121 – Trading securities).

b) Held to maturity investments must be recorded in the ledger according to their historical costs: buying price plus (+) buying expenses (if any) such as brokerage, transactions, information provision, taxes, bank's fees and charges.

c) The accountant must keep records of all held to maturity investments and sort them by term, type, currency, quantity, etc. When preparing a financial statement, accountants shall record them as long-term or short-term assets according to the remaining term (under 12 months or more than 12 months from the reporting date.

d) The enterprise must promptly and fully record financial income from investments such as deposit interest, loan interest, profit or loss on liquidation or transfer of held to maturity investments, etc.

dd) The enterprise must promptly and fully record incomes from held to maturity investment. When receive investment interests including the investment interests accrued before re-buy that investment, that interests must be allocated. Interest in the periods after the enterprise purchases such investment shall be recorded as financial income. The interest accrued before the enterprise repurchases the investment shall be recorded as a decrease in its value.

e) Accountants shall assess the recoverability of held to maturity investments other than loans. If there is evident that an investment is partially or fully unrecoverable, accountants shall aggregate the loss with financial expense in the period. In cases where the loss cannot be reliably identified, the accountant is not required to record it as a decrease, but the recoverability of such investment must be reported on the financial statement.

g) When the financial statement is prepared, the accountant must re-asset all held to maturity investments classified as foreign currency monetary items at the closing average transfer rate of the enterprise’s regular bank.

The determination of the average transfer rate and method for handling exchange difference due to reassessment of foreign currency monetary items are specified in Article 52 of this Circular.

2. Structure and contents of account 128 – Held to maturity investments

Debit:

Value of held to maturity investments increases.

Credit:

Value of held to maturity investments decreases.

Debit balance:

Value of current held to maturity investments at the reporting time.

Account 128 – Held to maturity investments, comprising two sub-accounts:

- Account 1281 - Term deposits: reflecting increases, decreases and balance of term deposits.

- Account 1288 – Other held to maturity investments: reflecting increases, decreases and balance of other held to maturity investments such as preference shares which the issuer is required to repurchase them in a certain time in the future, commercial papers, bonds and held to maturity loans.

Article 16. Rules for accounting of receivables

1. The receivables shall be sorted by terms, debtors, currency and other factors according to requirements for management.

2. The receivable shall be classified as trade receivables, intra-company receivables and other receivables as follows:

a) Trade receivables include commercial receivables generating from purchase-sale related transactions, such as: receivables from sales, services, liquidation or transfer of assets (fixed assets, investment property, financial investments) between enterprises and buyers (independent units against buyers, including units in which the enterprise invest). These receivables include receivables for sale of exports via the trustee.

b) Intra-company receivables include receivables between superior units and affiliated units.

c) Other receivables include non-commercial or non-trading receivables, such as:

- Receivables generating financial income, such as: receivables from loan interest, deposit interest, dividends and divided profits;

- Reimbursable payments on behalf of a third party; receivables on behalf of the trustor which are collected by the trustee;

- Non-commercial receivables include non-monetary borrowed assets, fines, compensation, unresolved asset losses, etc.

3. When preparing a financial statement, the receivables shall be classified as short-term receivables or long-term receivables according to their remaining terms. Receivables on the financial position statement may include amounts recorded to accounts other than accounts receivable, such as: loans recorded to account 1288; deposits recorded to account 1386, advances recorded to account 141, etc. The allowance for bad debts shall be determined according to the items classified as short-term receivables and long-term receivables on the financial position statement.

4. Receivables in foreign currencies shall be sorted by currency and debtors as follows:

- When receivables are recorded (debit side of accounts receivable), they shall be converted into the accounting currency at the actual exchange rate applied at that time.

In case of advance received from the buyer where the criteria for recognition of revenues and incomes are met, the advance shall be recorded in Dr 131 at the specific exchange rate applied at the time of advance payment.

- When collecting receivables (recorded to debit side of accounts receivable), the enterprise may select between the recorded weighted average exchange rates applied to each debtor or the actual exchange rates at the time of collection.

Advance payments by buyers recorded to Dr 131 shall apply the actual exchange rate at the time of advance payment.

5. In the cases where the enterprise applies the actual exchange rate to record the receivables and exchange differences that occur in the period in the credit side of accounts receivable, it may record them at the time of payment or on a periodical basis depending on the characteristics of its operation. If at the end of accounting period:

- If the balance of accounts receivable is empty, the enterprise must aggregate all exchange differences that occur in the period with financial income or financial expense in the period.

- If the balance of accounts receivable is positive, the enterprise shall carry out reassessment as specified in Article 52 of this Circular.

6. The receivables that are foreign currency monetary items must be reassessed at the time of preparation of the financial statement at the closing average transfer rate of the enterprise’s regular bank.

The determination of the average transfer rate and method for handling exchange difference due to reassessment of receivables that are foreign currency monetary items are specified in Article 52 of this Circular.

7. Allowance for bad debts shall be made for those that are foreign currency monetary items.

Article 17. Account 131 – Trade receivables

1. Rules for accounting

a) This account is intended to record receivables and payments of receivables of customers from goods, investment property, fixed assets, financial investment or services. This account is also intended to record receivables from contractors and contract awarders related for finished infrastructure development works. This account is not intended to record immediate cash.

b) The receivables must be recorded specifically to every debtor, every receivables item and monitor the recovery terms (above 12 months or not exceeding 12 months from the reporting time) and keep record for every payment. Debtors are customers that purchase of goods and/or services from the enterprise, including fixed assets, investment property or other financial investments.

c) The export trustor shall record receivables for sale of exports from the trustee to above account similarly to ordinary sales of goods or service provision.

d) When recording this account, the debts shall be classified as recoverable debts, doubtful debts or irrecoverable debts to determine allowance for bad debts or solutions for bad debts. The loss on bad debts minus (-) provision shall be aggregated with the administration expenses in the accounting period. Doubtful receivables that are collected shall be aggregated with other incomes.

dd) If the goods, investment property or services are provided against agreements between the enterprise and the customer, the customer may request the enterprise to give a discount or return the goods.

2. Structure and contents of account 131 – Trade receivables

Debit:

- Trade receivables generated within a tax period from sale of goods, investment property, fixed assets, services or financial investments;

- Excess cash returned to customers.

- Reassessment of trade receivables that are foreign currency monetary items at the time of preparation of the financial statement (if foreign currency rate rises against the recorded exchange rate).

Credit:

- Debts owed by customers';

- Advances received from customers;

- Discounts deducted from trade receivables;

- Sales of returned goods (inclusive or exclusive of VAT).

- Payment discounts and trade discounts offered to buyers;

- Reassessment of trade receivables that are foreign currency monetary items at the time of preparation of the financial statement (if foreign currency rate drops against the recorded exchange rate).

Debit balance:

Remaining trade receivables.

This account may have a positive credit balance: the credit balance reflects the advances or excess amount collected from customers sorted by customers. When preparing the financial position statement, the balance with detailed debtors shall be used to record both “Asset” and “Equity”

Article 18. Account 133 – Deductible VAT

1. Rules for accounting

a) This account is used to record input VAT that is deductible, has been deducted and remaining deductible VAT of the enterprise.

b) The deductible input VAT and non-deductible input VAT must be recorded separately. If they cannot be recorded separately, the input VAT shall be recorded to account 133. At the end of the tax period, the deductible input VAT and non-deductible input VAT shall be determined in accordance with regulations of law on VAT.

c) The non-deductible input VAT shall be recorded to values of purchased assets, costs of goods sold or operating expenses as the case may be.

d) Declaration and payment of deductible input VAT shall comply with regulations of law on VAT.

2. Structure and contents of account 133 – Deductible VAT

Debit:

Deductible VAT.

Credit:

- Deducted VAT.

- Carriedforward non-deductible input VAT.                                                                                                                

- Input VAT on purchased supplies and/or goods that are returned or discounted;

- Refunded input VAT.

Debit balance:

Remaining deductible input VAT, refundable input VAT pending refund.

Account 133 – Deductible VAT, comprising two sub-accounts:

- Account 1331 – Deductible VAT on goods or services: reflecting deductible input VAT on purchased supplies, goods or services serving production of goods or provision of services subject to VAT using credit-invoice method.

- Account 1332 – Deductible VAT on fixed assets: reflecting deductible input VAT on purchase of fixed assets or investment property serving production of goods or provision of services subject to VAT using credit-invoice method.

Article 19. Account 136 – Intra-company receivables

1. Rules for accounting:

a) This account reflects receivables and payment of receivables between the enterprise (superior unit) and affiliated units or among affiliated units. The superior unit means an affiliated unit that does bookkeeping such as a branch, factory, etc.

b) Content of intra-company receivables recorded to account 136:

- At the superior unit:

+ Capital, funds or funding allocated to inferior units;

+ Amounts payable to the superior unit by inferior affiliated units;

+ Amounts collected by inferior units;

+ Payments on behalf of inferior units;

+ Fixed amounts allocated to inferior units to perform internal works which have been completed.

+ Other current receivables.

- At the affiliated unit:

+ Amounts allocated by the superior unit which have not been received;

+ Values of goods and/or services transferred to the superior unit or other internal units for sale;

+ Revenue from sale of goods or provision of services for internal units;

+ Amounts collected by the superior unit or other internal units;

+ Amounts paid on behalf of the superior unit and other internal units;

+ Other current receivables.

c) Account 136 must be kept records of every inferior unit in details and every intra-company receivables must be separately monitored. The enterprise must take measures for settlement of intra-company receivables within the tax period.

d) At the end of tax period, it is required to compare and verify the balance of account 136 “Intra-company receivables”, account 336 “Intra-company payables” with each inferior unit. Each account of each affiliated unit or other internal unit shall be offset against each other; Account 136 and Account 336 shall also be offset against each other. If difference is found while collating, cause of such difference must be identified to make adjustments.

2. Structure and contents of account 136 – Intra-company receivables

Debit:

- Working capital provided for inferior units;

- Payments on behalf of the superior unit or other internal units;

- Receivables by the superior unit, amounts payable made by inferior units;

- Amounts receivables by inferior units; amounts payable the superior unit;

- Receivables from sale of goods/services among internal units;

- Other intra-company receivables.

Credit:

- Capital or fund recovery of inferior units;

- Collected intra-company receivables.

- Intra-company receivables offset against intra-company payables of the same entity.

Debit balance: Outstanding receivables from subsidiaries.

Account 136 – Intra-company receivables, comprising two sub-accounts:

- Account 1361 – Working capital provided for affiliated units: This account is only opened by the superior unit to record current working capital of affiliated units by the superior unit.

- Account 1368 – Other intra-company payables: reflecting payables between internal units other than working capital.

Article 20. Account 138 – Other receivables

1. Rules for accounting

1.1. This account reflects debt receivables other than those reflected by account 131 – trade receivables, account 136 – intra-company receivables and repayment of these debts, including:

- Value of shortage of assets without identified cause pending resolution;

- Material compensation for loss or damage of materials, goods or capital, etc. caused by individuals or groups (inside or outside the enterprise);

- Non-monetary assets borrowed by other entities (cash loans shall be recorded to account 1288);

- Investment in capital construction, operating expenses that have to be withdrawn because they are disapproved by competent authorities;

- Reimbursable payments on behalf of a third party that have to be withdrawn such as banking fees, customs inspection fees, delivery expenses, material handling expenses, taxes, etc .

- Loan interests, dividends, profits receivables from financial investment;

- Sum of money or value of the assets used by the enterprise as pledge or deposit in other enterprises or organizations in lawful economic relations.

- Other receivables.

1.2. Rules for accounting of pledges and deposits

a) The amounts of money or assets used as pledge and deposit shall be monitored and promptly redeemed upon expiration of the pledging or depositing period. Regarding overdue deposits to which the enterprise is entitled, the enterprise shall create provisions for them as if they are bad debts.

b) The enterprise must keep track of the pledges and deposits and sort them by type, pledgee, term and currency. When preparing a financial statement, the amounts that are due in less than 12 months shall be classified as short-term assets; These amounts that are due after 12 months shall be classified as long-term assets.

c) The assets used as pledge or deposit purpose shall be recorded at the book value of the enterprise. The same price of a non-monetary asset used as pledge or deposit shall be recorded when it is dispatched from or delivered to inventory. Collateral in the form of a certificate of ownership (i.e. real estate) shall not be recorded as a decrease in assets but they shall be monitored in the accounting records (sub-account: collateral) and presented in the financial statement.

d) If there are deposits in cash or cash equivalents which are paid back in foreign currencies, they shall be re-assessed according to closing transfer rate published by the enterprise’s regular bank.

1.3. In principle, whenever asset deficiency is discovered, the cause and the responsible person must be identified and dealt with properly. The asset deficiency shall only be recorded to account 1381 if the cause of deficiency, loss or damage of the assets has not been identified. If the cause for asset deficiency is identified and settled within the tax period, they shall be recorded to equivalent accounts except account 1381.

The value of inventory wastage and loss (except acceptable wastage during purchasing process which is aggregated with inventory value) minus (-) collected damages shall be aggregated with the cost of goods sold.

The value of remaining unresolved asset losses minus (-) damages paid by relevant entities shall be aggregated with the enterprise’s other expenses.

1.4. The loss on doubtful recoverable minus (-) provision shall be aggregated with the administration expenses.

2. Structure and contents of account 138 – Other receivables

Debit:

- Value of unresolved asset losses;

- Receivables from individuals or groups (inside or outside the enterprise) where the cause of asset deficiency is discovered,

- Loan interests, deposit interests, dividends or profits receivables from financial investment;

- Reimbursable payments on behalf of a third party; other debt receivables;

- Value of assets used as pledge or cash deposit;

- Reassessment of other receivables that are foreign currency monetary items (if foreign currency rate rises against the recorded exchange rate).

Credit:

- Carriedforward value of asset deficiency to relevant accounts according to the decision;

- Other debts collected;

- Value of collateral or cash deposit which have been redeemed or paid for;

- Deductions (fines) from cash deposits shall be aggregated with other expenses;

- Reassessment of other receivables that are foreign currency monetary items (if foreign currency rate drops against the recorded exchange rate).

Debit balance:

Other outstanding debts receivable.

This account may have a positive credit balance: the credit balance reflects the amount collected in excess of the amount receivable (in special cases).

Account 138 – Other receivables, comprising three sub-accounts:

- Account 1381 – Unresolved asset losses: reflecting the value of asset deficiency pending resolution.

- Account 1386 – Pledges and deposits: reflecting the amount of money or value of property used by the enterprise as pledges or deposits in other enterprises or organizations in lawful economic relations.

- Account 1388 – Other receivables: reflecting receivables of the enterprise other than those reflected by accounts 131, 133, 136, 1381, 1386, such as: dividends, profits or interests receivables; compensation for loss of money or assets; etc.

Article 21. Account 141 – Advances

1. Rules for accounting

a) This account is used to record advances paid by the enterprise to its employees and reimbursement thereof.

b) Advance means an amount or supply given to a person to do business or perform an approved task. The recipients of advances must be the enterprises’ employees. Regular recipients of advances (performing supply, management, administrative tasks) must be appointed by the enterprise’s Director (General Director) in writing.

c) The recipient (an individual or a group) is responsible for the advance received and the use thereof. If the advance that remains must be returned to the fund. The advance recipient must not transfer it to any other person.

When the task is complete, the advance recipient shall prepare a statement (enclosed with original documents) to fully reimburse the advance received, used or difference between them (if any). If the unused advance is not returned, it will be deducted from the recipient’s salary. If the expenditure is greater than the advance, the enterprise will cover the difference.

d) The advance given in a tax period must be completely reimbursed for before the next period’s advance is given. The accountant must keep records of recipients, provision and reimbursement of advances.

2. Structure and contents of account 141 – Advances

Debit:

Advanced money or supplies to employees by the enterprise.

Credit:

- Reimbursed advances;

- Unused advances to be returned to the fund or deducted from salaries;

- Unused supplies which are re-stored.

Debit balance:

Unreimbursed advances;

Article 22. Rules for accounting of inventory

1. The group of inventory accounts is intended to reflect existing value and changes in inventory of the enterprise (if the enterprise keeps regular accounts of inventory) or reflect opening and closing value of inventory in the tax period (if the enterprise applies the periodic inventory system).

2. Inventory of the enterprise is purchased assets serving production or for sale in an ordinary course of business, including:

- Goods in transit;

- Raw materials;

- Tools

- Unfinished products;

- Finished products;

- Goods;

- Deposited goods for sale.

3. The products, goods, supplies, assets under agreement on storage, deposit, import-export trust, processing, etc. which are not under ownership and control of the enterprise shall not be recorded to inventory.

4. Accounting of inventory must comply with regulations on Vietnamese accounting standard (VAS) “Inventory” when determining historical cost of inventory, method for calculation of value of inventory, determination of net realizable value, making provision against devaluation of inventory and recording costs.

5. Rules for determination of historical cost of inventory vary according to the type of supplies, goods, sources and time of pricing.

6. Non-refundable taxes aggregated with value of inventory include: non-deductible input VAT on inventory, special excise duty, import duty, environmental protection tax payable when buying inventory.

- Trade discounts received upon inventory purchase (including breach of business contracts) must be distributed among the quantity of goods in stock, goods sold, goods used for business operation or capital construction.

+ If goods are still in stock, the discount shall be recorded as a decrease in inventory value;

+ If goods in stock are sold, the discount shall be recorded as a decrease in the cost of goods sold;

+ If goods in stock are used for capital construction, the discount shall be recorded as a decrease in capital construction expenditure.

- Discounts on purchases of inventory shall be aggregated with financial income.

7. When selling inventory, the historical cost of sold inventory shall be recorded as operating expenses of the tax period in conformity with relevant revenues and the nature of transactions. When inventory is dispatched for promotion or advertisement purposes, the rules below shall be followed:

a) If the inventory is dispatched for promotion or advertisement purposes without collecting money and other conditions (compulsory purchase of goods, etc.), the value of inventory shall be recorded as selling expenses (sub-account: promotional merchandise);

b) If the inventory is conditionally dispatched for promotion or advertisement purposes (e.g. buy two, get one free, etc), accountants shall also record the revenues from promotional goods; the value of promotion goods shall be recorded as cost (in this case it is a decrease in the selling price).

c) In the cases where inventory given to employees as gifts are covered by the welfare fund or as salaries, accountants shall record the revenues and cost as if ordinary sales. The value of inventory given as gifts shall be recorded as a decrease to the welfare fund.

d) Discounts on sale of inventory shall be recorded as financial expense.

8. When determining value of inventory dispatched in the period, the enterprise shall applies one of following methods:

a) Specific identification method: Because this method is applied according to actual value each purchase and each article produced, it will only be applied by enterprises having a small amount of articles or stable supply of goods and price of each shipment is identifiable.

b) Weighted average method: Value of every inventory article equals (=) mean value of each opening inventory article and value of each inventory article sold or produced in the current period. The mean value may be calculated once every period or after a shipment is received depending on the enterprise’s specific conditions.

c) “First in, first out method” (FIFO): This method assumes that inventory purchased or manufactured first is sold first and the closing value of inventory is the value of those purchased or manufactured near the end of the accounting period. According to this method, the value of dispatched inventory shall apply prices of inventory purchased at or near the beginning of the accounting period; the closing value of inventory shall apply prices of inventory purchased at or near the end of the accounting period.

Every inventory costing method has their certain advantages and disadvantages. The accuracy and reliability of each method depends on management requirements, standards, proficiency, calculating equipment or means of information processing of the enterprise. It also depends on goods preservation requirements, complexity of categories, specifications and fluctuation of the enterprise’s supplies or goods.

9. Regarding inventory purchased with foreign currencies, the value of inventory depends on the actual exchange rates. In the cases where the enterprise pays the seller in advance, the value of inventory paid in advance shall be recorded at the actual exchange rate at the time of advance payment; the value of remaining inventory shall be recorded at the actual exchange rate at the time of recording.

Accounting of foreign currency-related inventory and handling of exchange differences are specified in Article 52 of this Circular.

10. At the end of the accounting period, if the inventory value is not fully recovered due to damage, obsolescence, decrease in selling prices or increase in product improvement expenses or selling expense, a decrease in historical cost of inventory which equals (=) to the net realizable value of inventory shall be recorded. Net realizable value means the estimated selling price for inventory in an ordinary course of business minus (-) estimated product improvement expense or selling expense.

The decrease in historical cost of inventory which is equal to net realizable value shall be recorded by making provision against devaluation of inventory. The provision against devaluation of inventory is the positive difference between the historical cost and the net realizable value of inventory.

Unrecoverable loss of inventory due to damage or obsolescence minus (-) provision against devaluation of inventory (if any) shall be recorded as cost of goods sold in the accounting period.

All differences between provision against devaluation of inventory made at the end of one accounting period must be greater than provision made at the end of the previous accounting period; the loss of inventory minus (-) paid damages and undistributed factory overhead shall be recorded as cost of goods sold in the period. If the provision against devaluation of inventory made at the end of one accounting period is smaller than the provision made at the end of the previous accounting period, the difference shall be reversed and recorded as a decrease in cost of goods sold in the period.

11. Inventory value and inventory in kind must be specifically accounted for in details in terms of categories, specifications, management and use locations; ensure the conformity between actual value of supplies or goods and that in the accounting books.

If excess inventory found during stocktaking is under the ownership of another enterprise, it must not be recorded as an increase in inventory.

12. An enterprise may only apply one of these two methods for inventory accounting: perpetual inventory system, or periodic inventory system. The method for inventory accounting shall be selected within the fiscal year according to the characteristics, quantity, categories of supplies or goods and management requirements.

Methods for inventory accounting.

a) Perpetual inventory system: This system is intended to regularly and continuously monitor and update the inventory on the accounting records. When applying the perpetual inventory system, inventory accounts shall be used to reflect current quantities, increases and decreases of supplies or goods. Therefore, the value of inventory on accounting record may be determined at any time in the accounting period.

At the end of an accounting period, the physical inventory count shall be compared with data in the ledger. In principle, the actual inventory count must match data in the ledger. In case of any difference, the cause must be identified and promptly dealt with. The perpetual inventory system is usually applied to manufacturing enterprises (industry enterprises, construction enterprises, etc.) and enterprises trading in high-value articles such as machinery, devices, high-tech or high-quality products, etc.

b) Periodic inventory system:

- The periodic inventory system is intended to update the closing inventory in the general accounting books according to the physical inventory count and calculate value of goods or supplies dispatched in the accounting period following this formula:

- According to periodic inventory system, changes in supplies or goods (receipts, dispatches) shall not be reflected in inventory accounts. The value of supplies or goods purchased and received in an accounting period shall be reflected in account 611 “Purchases”.

- The physical inventory count and determination of value of goods or materials dispatched in each accounting period (serving production or for sale) shall be conducted at the end of the period and are as the basis for recording account 611 “Purchases”. When applying periodic inventory system, inventory accounts shall only be used at the beginning of the accounting period (for carryforward of opening balance) and at the end of the accounting period (for recording actual ending inventory).

- This method is usually applied to enterprises trading in multiple categories of goods or supplies with greatly different specifications or models, of low value, and are regularly consumed or sold (at retail outlets, etc). This method is considered simple and easy. However, accuracy in terms of value of supplies or goods consumed or sold is affected by the management works.

13. Goods in stock are classified a supplies, devices or spare parts according to characteristics of the enterprise’s operation.

14. Cost of transport and storage of inventory incurred during purchase or production/processing shall be aggregated with their historical cost. Cost of transport and storage of inventory related to the sale there of shall be aggregated with selling expense.

Article 23. Account 151 – Goods in transit

1. Rules for accounting

a) This account reflects values of purchased goods and supplies (raw materials, tools, goods) that are under the ownership of the enterprise and still in transit, at a port, a depot, a bonded warehouse or have arrived at the enterprise pending stocking.

b) Goods or supplies considered owned by the enterprise but not been stocked include:

- Goods or supplies that have been paid for have been purchased but have not been paid for and are still in the warehouse of the seller, at a port, a depot or on in transit;

- Goods or materials arrived at the enterprise pending stocking.

c) Goods in transit shall be recorded in account 151 at their historical cost.

d) Every day when receiving purchase invoices before goods are stocked, accountants shall delaying recording them, compare them with business contract and store invoices in a separate dossier “Goods in transit”.

When goods are stocked in the accounting period, they shall be recorded in account 152 “Raw materials”, account 153 “Tools", account 156 “Goods” according to warehousing receipts and sale invoices.

dd) If the goods do not arrive at the end of the period, they shall be recorded to account 152 "Goods in transit” according to the sale invoices. The accountant must keep specific records of goods in transit and sort them by category, shipment and or business contract.

2. Structure and contents of account 151 – Goods in transit

Debit:

- Value of purchased goods or supplies in transit;

- Carriedforward value of purchased goods or supplies in transit at the end of the accounting period (if the enterprise applies the periodic inventory system)

Credit:

- Value of purchased goods or supplies in transit which are stocked or delivered to customers;

- Carriedforward value of purchased goods or supplies in transit at the beginning of the accounting period (if the enterprise applies the periodic inventory system)

Debit balance: Value of purchased goods or supplies in transit (not stocked).

Article 24. Account 152 – Raw materials

1. Rules for accounting

a) This account is intended to record current values, increases and decreases in values of all raw materials in enterprise’s stock. Raw materials are purchased or produced to serve the enterprise’s business operation. Raw materials recorded in this account shall be classified as follows:

- Direct materials are materials incorporated into the final products. Hence, the term “direct material” term must be accompanied by a specific manufacturer. Trading enterprises and service providers do not classify raw materials into direct and indirect materials. Direct materials also include semi-finished goods purchased for incorporation into the finished goods.

- Indirect materials are materials not incorporated into the final product, but which are combined with direct materials during the production process to change colors, tastes, shapes or improve quality of the final product or facilitate the production process, technology, packaging or preservation; or serve the enterprise’s operation.

- Fuels are any materials providing heat energy during the production process and facilitate the process of making usual product. Fuels exist in liquid, solid and gaseous states.

- Spare parts are materials used for repair of machinery, equipment, vehicle, manufacturing tools, etc.

- Building materials and equipment are materials and equipment used for basic building tasks. Building equipment include equipment requiring installation and not requiring installation, tools, instruments and structures used to installed in the building works.

b) The received, dispatched and stocked raw materials in account 152 shall be accounted for according to historical cost principle. Historical cost of raw materials shall be determined according to their sources.

- Historical cost of raw materials include: Buying princes on invoices, non-refundable taxes, cost of transport, material handling, storage, classification, insurance, etc. of raw materials from the place of purchase to the enterprise’s warehouse, payments to purchasing employees, operating expenses of the purchasing department, other costs related to the purchase of raw materials and acceptable wastage (if any):

+ If VAT on imports is deductible, the value of purchased raw materials will be exclusive of VAT.

+ If VAT on imports is non-deductible, the value of purchased raw materials will be inclusive of VAT.

- The historical cost of self-produced raw materials consists of actual price of raw materials and production costs.

- The historical cost of raw materials processed under an outsourcing agreement consists of the actual price the raw materials, cost of transport to the processing facility and vice versa, and payment for outsourced processing.

- The historical cost of raw materials contributed to as capital to a jointly controlled entity or joint-stock company is value approved by the cost which all contributors.

c) The value of raw materials dispatched in an accounting period shall be calculated according to one of following methods:

- Specific identification method;

- Weighted average method after each receipt or at the end of the period;

- FIFO method.

The enterprise must apply the chosen method throughout the accounting period.

d) The raw materials shall be specifically accounted for and sorted by warehouse and category. In cases where the enterprise uses the recorded price, the difference coefficient between the actual price and recorded price of raw materials shall be determined at the end of the period according to following formula:

dd) Raw materials that are not owned by the enterprise shall not be reflected in this account.

2. Structure and contents of account 152 – Raw materials

Debit:

- Actual value of purchased raw materials, self-produced raw materials, raw materials processed by third parties, raw materials contributed as capital or from other sources;

- Value of excess raw materials found during stocktaking;

- Carriedforward value raw materials in stock at the end of the accounting period (if the enterprise applies the periodic inventory system)

Credit:

- Actual value raw materials dispatched serving the enterprise’s business operation, for sale, for processing by third parties or contributed as capital;

- Value of raw materials returned to sellers or discounted;

- Trade discounts offered when purchasing raw materials;

- Loss of raw materials found during stocktaking;

- Carriedforward value of raw materials in stock at the beginning of the period (if the enterprise applies the periodic inventory system).

Debit balance:

Actual value of raw materials in stock at the end of the period.

Article 25. Account 153 – Tools and instruments

1. Rules for accounting

a) This account reflects current value, increases and decreases in tools and instruments the enterprise. Tools and instruments are labor materials that are not qualified as fixed assets. Thus, tools and instruments shall be managed and recorded similarly to raw materials. According to effective regulations, the following labor materials shall be recorded as tools and instruments if they are not qualified as fixed assets:

- Scaffolding, formwork, tools, jigs used for construction manufacturing;

- Types of packaging enclosed with goods charged separately, but their values are depreciated during preservation of goods in transit and storage in the warehouses;

- Tools and instruments made of glass, porcelain, ceramic;

- Management instruments, office supplies;

- Clothing, footwear designed exclusively for work, etc.

b) Received, dispatched or stocked tools and instruments shall be recorded to account 153 at their historical cost. Rules for determination of historical cost of tools and instruments received shall comply with regulations on raw materials (see explanation to account 152).

c) The value of dispatched tools and instruments shall be determined according to one of following three methods:

- FIFO method;

- Specific identification method;

- Weighted average method after each receipt or at the end of the period.

d) Tools and instruments shall be sorted by warehouse, category and group. Value of dispatched tools and instruments serving the enterprise’s business operation or for rent be monitored on the accounting books by place of use, renter and responsible for persons. Valuable or rare tools and instruments must be preserved using special methods.

dd) Tools and instruments of low value serving the enterprise’s business operation shall be aggregated with operating expenses only once.

e) In case the tools and instruments, reusable packaging materials or instruments for rent are used by the enterprise’s to serve its business operation in multiple accounting periods, they shall be recorded to account 242 “Prepaid expenses" and gradually aggregated with cost of goods sold or operating expenses depending on the users.

2. Structure and contents of account 153 – Tools and instruments

Debit:

- Actual value tools and instruments purchased, self-produced, processed by third parties or contributed as capital;

- Value of received tools and instruments for rent;

- Actual value of excess tools and instruments found during stocktaking;

- Carriedforward actual value of tools and instruments in stock at the end of the period (if the enterprise applies the periodic inventory system)

Credit:

- Actual value of dispatched tools and instruments serving the enterprise’s business operation, for rent or for contribution as capital;

- Trade discounts on purchased tools and instruments;

- Value of tools and instruments returned to sellers or given discounts by sellers;

- Value of tools and supplies in deficiency found during stocktaking;

- Carriedforward actual value of tools and instruments in stock in the beginning of the period (if the enterprise applies the periodic inventory system).

Debit balance: Closing actual value of tools and instruments in stock.

Article 26. Account 154 - Work in progress

1. Rules for accounting

a) This account reflects to operating expenses which is the basis for calculation of prime cost of products or services by enterprises applying the perpetual inventory system. In the cases where an enterprise applies the periodic inventory system, Account 154 reflects the opening and closing actual value of work in progress.

b) Account 154 “Work in progress” reflects operating expenses incurred in an accounting period; operating cost of finished goods/service in an accounting period; opening and closing work in progress of the primary and secondary business lines, outsourcing to external manufacturers or service providers. Acc 154 also reflects operating expenses of manufacturing, processing, or service provision by trading enterprises (if any).

c) The operating expenses recorded to 154 shall be sorted by places at which the costs are incurred (workshops, production units, construction sites, etc.); by categories and groups of products or product parts; by categories or stages of services.

d) Operating expenses reflected by account 154 include:

- Direct costs of raw materials;

- Direct labor cost;

- Costs of construction machinery (for construction);

- Factory overhead.

dd) The raw materials or labor costs in excess to the normal rate and undistributed factory overhead shall be aggregated with cost of goods sold in the tax period instead of inventory value.

e) At the end of the period, fixed and variable factory overhead shall be distributed to processing cost per product according to actual cost incurred.

g) The following items shall not be recorded to account 154:

- Selling expenses;

- Administration expenses;

- Financial expenses;

- Other expenses;

- Corporate income tax;

- Investment in capital construction;

- Expenses covered by other sources.

2. Application of account 154 in industry

a) Account 154 - “Work in progress” may be applied to industry to reflect production costs and calculate prime cost of products of factories or production units. Regarding manufacturers hiring external processors or service providers, the costs thereof shall also be recorded to account 154.

b) Only the following items may be recorded to account 154:

- Cost of raw materials directly serving production;

- Cost of labor directly serving production;

- Factory overhead directly serving production.

c) In industrial enterprises, account 154 shall be recorded by places at which the costs are incurred (workshops, the production divisions), types or groups of products, products, or product parts.

d) The difference between the cost of experimental production and proceeds from liquidation or sale of products of the experimental production shall be recorded as increase or decrease in capital construction value.

3. Application of account 154 in agriculture

a) Account 154 - “Work in progress” may be applied to agriculture to reflect production costs and calculate prime cost of products of farming, husbandry, processing or agriculture services. Items in this account shall be sorted by agriculture sector (farming, husbandry, processing, etc.), location, category of seedlings and product or service.

b) Actual prime cost of agricultural products shall be determined at the end of the crop or the year. The prime cost shall be calculated in the year in which the products are harvested. To be specific, if the costs are incurred in one year but products are harvested in the next, the prime cost shall be calculated in the latter year.

c) In farming, costs shall be classified according to 3 following plants:

- Short-day crops (rice, potatoes, cassava, etc);

- Multi-harvesting single plants (pineapples, bananas, etc);

- Perennial plants (teas, coffees, rubbers, peppers, fruit plants, etc).

For crops harvested two or three times in a year, crops harvested one time every two years and crops that may be planted and harvested at the same in the year, etc. the costs between two continuous crops, two areas, two continuous years, etc. shall be separately recorded.

d) The cost of land reclamation, planting and caring of perennial plants during capital construction stage, selling expenses, administration expenses, financial expenses and other expenses shall not be recorded to this account.

dd) In principle, production costs of agriculture shall be recorded to Dr 154 “Work in progress”. Regarding the costs related to multiple accounting entities, multiple crops or multiple periods, they shall be recorded to separate accounts, then distributed to prime cost of relevant products: cost of irrigation water, the cost of land preparation and planting of crops harvested several times (this cost is not investment in capital construction), etc.

e) On the same farming area, if two or more short-term crops are intercropped, the costs related to each variety (seeds, cost of planting, harvesting, etc.) shall be recorded separately; costs of multiple varieties (plowing, irrigation, etc.) shall be distributed according to farming area or according to certain criteria.

d) Costs of perennial plants, the progress from tillage, sowing, cultivation to the onset of production (harvesting or bearing) shall be recorded to account 241 “Capital construction in progress” similarly to investment in requisition of fixed asset. Costs of perennial plantations incurred by the enterprise during its operation shall include the costs of cultivation or harvesting.

h) When recording expenses of husbandry to the account 154:

- The expenses of animal husbandry must be sorted by type or group of animal (cattle, pig, etc);

- Young animals of basic livestock herd after maternal separation shall be kept records at their actual prime cost;

- Large livestock and fattening animal shall be recorded to account 154 according to the remaining value of basic livestock;

- Prime cost in husbandry is calculated according to: prime cost of 1 kg of milk, 1 standard calf, 1 kg of meat, daily cost, etc.

i) Direct material costs, direct labour cost in excess of the normal rate and fixed factory overhead which are not distributed shall not be included in charged to prime cost of products and shall be aggregated with cost of goods sold in the accounting period.

4. Application of account 154 in service provision

a) Account 154 “Work in progress” may be applied provision of transport services, postal services, tourism, other services, etc. This account is used intended to record costs (direct raw materials cost, direct labor cost, factory overheads) and prime cost of the service rendered.

b) Regarding transport industry, this account is intended to reflect prime cost of road transport (automobiles, trams, other non-motorized vehicles, etc.) rail transport, waterway transport, aerial transport, pipeline transport, etc. Account 154 applied to the transport sector must be kept records in details by category (passenger transport, freight transport, etc.) and by each enterprise and service provision units.

c) During the transport process, the tires might be replaced several times because they are worn out more quickly than the depreciation rate of the car. However, the value of tires shall be depreciated steadily in each month instead of being included once in the prime cost of transport. Therefore, a truck transport enterprise may include the cost of tires to prime cost of transport in advance (payables) every period in accordance with applicable financial regulations.

d) Costs of raw materials, direct labour costs in excess of the normal rate and fixed factory overheads which are undistributed shall be included in cost of goods sold in the accounting period instead of prime cost of products.

dd) Regarding tourism industry, this account is intended to separately record tourism services such as: tour guiding, hotel services, tourist transport, etc.

e) Regarding hotel business, account 154 is intended used to separately record each service such as: food and drink, accommodation, entertainment, other services (laundry, haircuts, telegram, sports, etc).

5. Application of account 154 in construction

a) Because a construction enterprise only applies the perpetual inventory system instead of the periodic inventory system, account 154 is only reflects operating expenses which are the basis for determination of prime cost of products or services of the enterprise.

b) The direct material costs, labour costs in excess of the normal rate shall be included in cost of goods sold in the accounting period instead of the prime cost of the building work.

c) This account is used to monitor:

- Construction and installation: reflecting expenses, prime cost of construction products and value of construction in progress at the end of the period;

- Other products: reflecting expenses, prime cost of other products and value of other products in progress at the end of the period (finished goods, structural elements, etc.);

- Services: reflecting expenses, prime cost of services and cost of service in progress at the end of the period;

- Construction warranty expenses: reflecting expenses of construction and installation warranty incurred in the period and the value of construction in progress under warranty at the end of the period.

d) The production cost, prime cost of a construction product depends on the building work, work item and unit prices specified in the cost estimate, including:

- Materials cost;

- Labor cost;

- Costs of heavy-duty machinery;

- Overheads.

Factory overheads shall be recorded to Dr 1541 “Construction”, which consist of only overheads derived from the contractor or construction site. The administration expenses of a construction enterprise (as a part of overheads) shall be recorded to Dr 642 "Administration expenses". Those expenses shall be transferred to Dr 911 “Evaluation of business results” and included in the prime cost of the construction product and sold within the period.

dd) The investor of the property construction shall use this account to record cost of construction of finished property. In the cases where a piece of real property has multiple purposes (office, for lease or sale, e.g. mix-used buildings), it is required to follow rules below:

- If there are sufficient evidence for separately recording the cost of construction of the property for sale (finished property) and cost of construction of real estate for lease or for use as offices (fixed assets or investment assets), they must be separately recorded account 154. The cost of construction of fixed assets or investment assets must be recorded to account 241 – Construction in progress.

- If the aforementioned costs cannot be separately recorded, accountants shall record relevant costs to account 241. When the project is complete and put into operation, accountants shall carryforward the construction cost appropriate according to the use of each type of asset.

e) The provision for construction warranty shall be aggregated with operating expenses of each period. When the warranty expires and the provision is greater than the warranty cost, the difference shall be recorded as an increase in other incomes of the period. Otherwise, the difference shall be aggregated with cost of goods sold in the period.

g) Unrecoverable cost of a construction and installation contract recovered (e.g. legally unfeasible or doubtful validity, or clients’ failure to fulfill their obligations ...) shall be recorded as cost of goods sold in the period.

h) Proceeds from the sale of excess raw materials, liquidation of construction machinery and equipment upon termination of the construction contract shall be recorded as a decrease in operating expenses.

i) Direct raw materials:

- Items of direct raw materials consist of: Actual value of main materials, subsidiary materials, component parts on dismantled parts, circulated materials incorporated in construction products, or assist in implementation and performance of the construction work (not including subsidiary materials for machinery and operation facilities, and main materials expenses included in overheads).

- Raw materials used for a work item must be recorded directly to such work item according to original documents, actual volume of used materials, and price (using weighted average method, FIFO method, specific identification method).

- At the end of the accounting period or when the construction work is completed, remaining material at the production site (if any) shall undergo inventory count and be recorded as a decrease in costs of direct materials for construction.

- If calculation of the direct material cost of each building work or work item is not possible, the enterprise may allocate the materials among them according to appropriate criteria for (in proportion to consumption rate of materials, etc.).

k) Cost of construction machinery:

- The of construction machinery include costs of machinery serving performance of construction and installation tasks by machine. Construction machinery means machines directly serving construction and installation. such as machinery running on steam, diesel, petrol, electricity, etc. (including those serving construction and installation).

- Costs of construction machinery consist of regular costs and temporary costs. Regular costs include costs of machine operators, costs of tools and instruments, depreciation of fixed assets, costs of external services (minor repairs, electricity and water supply, insurance, etc.) and other costs in cash.

- Temporary costs include costs of major repairs (overhaul, etc.) which must not be recorded as an increase in cost of construction machine; Costs of temporary works for operating machine (huts, sheds, platforms, rails) may incur in advance (record to Dr 242) and then gradually included in Dr 154, or incur later and included in advance to cost of construction in the period. In this case, accrued expense shall be recorded to Cr 352 “Provision for liabilities”, Dr 154: cost of construction machinery.

l) Factory overheads:

Factory overheads reflects production costs of a construction team or construction site, including: salaries of factory management staff, construction teams, social insurance, health insurance, unemployment insurance, occupational accident insurance, trade union fees deducted from salaries of machine operators and managers; depreciation of fixed assets and relevant costs.

6. Structure and contents of account 154 - Work in progress

Debit:

- Direct raw materials costs, direct labor costs, costs of construction machinery, factory overheads incurred in an accounting period related to production and costs of service provision;

- Direct raw materials costs, direct labor costs, costs of construction machinery, factory overheads incurred in an accounting period which is related to fixed prime cost;

- Carriedforward work in progress at the end of the period (if the enterprise applies the periodic inventory system).

Credit:

- Actual prime cost of manufactured products which are stocked, delivered for sale, internally consumed or used for capital construction;

- Prime cost of construction products that are finished and partially or fully transferred in the period; or transferred to main contractor (superior or internal unit), or prime cost of finished construction products pending consumption.

- Actual expenses of services rendered;

- Value of returned scraps; value of damaged products which are not repairable;

- Value of processed and stocked materials and goods;

- Direct material costs, labour costs in excess of the normal rate shall be included in cost of goods sold in the period instead of inventory value. Regarding enterprises manufacturing according to orders and enterprises having long production cycle where fixed factory overheads reflected by account 154, which cannot be identified until products are finished and thus cannot be aggregated with inventory value, they shall be aggregated with cost of goods sold (Cr 154, Dr 632);

- Carriedforward work-in-progress at beginning of the period (in case business applies the periodical inventory system).

Debit balance: Closing work in progress.

Article 27. Account 155 – Finished goods inventory

1. Rules for accounting

a) This account reflects current values, increases and decreases of finished goods of the enterprise. Finished goods inventory are products which have been completely undergone the manufacturing process by the enterprise or an external processor, satisfy technical standards and are stocked.

In export entrustment, this account is only used by the trustor, not by trustee

b) The finished goods produced by primary and secondary production units of the enterprise must be assessed according to their prime cost (historical cost), including: direct raw materials cost, direct labor cost, factory overhead and relevant costs.

c) The items must not be included in the historical cost of finished goods:

- Costs of raw materials, labor and other operating expenses in excess to the normal rate;

- Costs of transport, storage of inventory except for those necessary for the next manufacturing process and preservation cost incurred during the purchasing process;

- Selling expenses;

- Administration expenses;

d) Finished goods processed by external processors shall be assessed according the prime cost of processing, including: direct raw materials cost, outsourcing cost and relevant costs.

dd) The value of finished goods shall be calculated using one of the following methods: specific identification method; weight average method; FIFO method.

e) In cases where the enterprise applies the periodic inventory system, finished goods received and dispatched shall be recorded daily according to the recorded price, which may be intended price or buying price. At the end of the period, the prime cost of finished products stocked and difference between the actual prime cost and recorded price of finished goods (including the opening difference) must be calculated as the basis for calculation of actual prime cost of finished goods received and dispatched in the period (using the formula provided in account 152 “Raw materials”).

g) Finished goods shall be recorded and sorted by warehouse, category and group.

2. Structure and contents of account 155 – Finished goods

Debit:

- Value of finished goods stocked;

- Value of excess finished products found during stocktaking;

- Carriedforward actual price of finished products in stock at the end of the period (if the enterprise applies the periodic inventory system)

Credit:

- Actual cost of dispatched finished goods;

- Value of loss of finished goods found during stocktaking;

- Carriedforward actual price finished goods in stock at the beginning of the period (if the enterprise applies the periodic inventory system)

Debit balance: Actual value of finished goods in stock at the end of the period.

Article 28. Account 156 – Merchandise inventory

1. Rules for accounting

a) This account reflects current value, increases and decreases in merchandise inventory of an enterprise, including merchandise in stock and real estate. Merchandise means supplies and products purchased by an enterprise for sale (wholesale or retail). Merchandise purchased both for sale and serving the enterprise’s operation shall be recorded to account 156 “Merchandise inventory”

In the import-export entrustment, this account is only used by the trustor, not by the trustee.

b) The following merchandise shall not be recorded to account 156 “Merchandise inventory”:

- Consignment goods sold or kept on behalf of other enterprises;

- Purchased raw materials, tools and instruments serving the enterprise’s business operation (recorded to account 152 “Raw materials" or account 153 “Tools and instruments", etc).

- Finished products manufactured by the enterprise (record to account 155 “Finished products”).

c) Received, dispatched or stocked merchandise inventory recorded to account 156 shall be according to historical cost principle. The historical cost of purchased merchandise consists of: buying price, buying expenses (transport, material handling, storage, insurance, etc.), import duty, special excise tax, environmental protection tax (if any), VAT on imports goods (if not deductible). If the enterprise buys merchandise for reselling but they must be processed, prepared, refurbished or classified for to increase their value and merchantability, the merchandise value shall include processing/preparation cost.

- The historical cost of purchased merchandise varies according to their sources.

- To calculate the value of merchandise dispatched, the accountant may apply one of following methods:

+ FIFO method;

+ Specific identification method;

+ Weighted average method after each receipt or at the end of the period.

- Special entities (e.g. supermarkets) may determine the closing value of inventory using retail inventory method. With this method, the value of merchandise dispatched shall be determined according to the selling price of inventory minus (-) profit margin (determined by the enterprise) in an appropriate ratio (%). Possible devaluation of merchandise may be taken into account when determining the aforesaid ratio. Each retailer usually uses their own ratio.

- The cost of merchandise purchase in a period may be directly aggregated with historical cost of inventory or distributed to goods sold in the period and closing inventory. The criteria on distribution of purchase cost depend on the enterprise’s conditions and must be consistent.

d) When buying merchandise accompanied with accessories or spare parts (for replacement), the accountant must determine and separately record the values of such accessories or spare parts. The value of stocked merchandise is exclusive of the value of accessories and spare parts.

dd) The merchandise inventory shall be sorted by warehouse, category and group.

e) If the enterprise is a distributor that receives goods without paying the manufacturer for advertising or sale promotion:

- When receiving merchandise without paying the manufacturer for advertising or sale promotion, the distributor must keep track of the quantity of merchandise in its system and specify the quantity of merchandise received and merchandise used for sale promotion on the notes to financial statement.

- If the manufacturer does not request the return of remaining promotional merchandise after the end of the sale promotion program, the value of the merchandise retained shall be recorded as other incomes.

2. Structure and contents of account 156 – Merchandise inventory

Debit:

- Buying price of merchandise according to sale invoices (inclusive of non-refundable taxes);

- Buying expenses;

- Value of merchandise processed by external processors (comprising buying price and processing cost);

- Value of goods returned by buyers;

- Value of excess merchandise found during stocktaking;

- Value of real estate purchased or converted from investment property;

- Carriedforward value of inventory at the end of the period (if the enterprise applies the periodic inventory system).

Credit:

- Value of dispatched merchandise for sale, delivery to agents, affiliated units; processed by external processors; or used for the enterprise’s business operation;

- Buying expenses distributed to merchandise sold in the period;

- Trade discounts on purchased merchandise;

- Discounts on purchased merchandise;

- Value of goods returned to sellers;

- Value of loss of merchandise found during stocktaking;

- Value of real estate sold or converted into investment property, owner’s property or fixed assets;

- Carriedforward value of inventory at the beginning of the period (if the enterprise applies the periodic inventory system).

Debit balance: Historical cost of inventory.

Article 29. Account 157 – Goods on consignment

1. Rules for accounting

a) Goods on consignment reflected by account 157 shall be recorded according to historical cost principle. The account 157 “Goods on consignment” only reflects value of goods or finished goods sent by the enterprise (consignor) to customers or agents (consignees), services rendered under contracts or orders but are not considered “sold” (not included in revenue from sale of goods in the period).

b) The goods and finished goods recorded to this account are still under ownership of the enterprise and they must be sorted by category and time of consignment until they are considered “sold”.

c) The cost of transport, material handling, payment on behalf of customers, etc. shall not be recorded to this account. The account 157 may sort goods and finished goods on consignment and rendered services by customer and consignee.

2. Structure and contents of account 157 – Goods on consignment

Debit:

- Value goods and finished goods sent to customers and consignees;

- Value of services rendered to customers but they are not considered “sold”;

- Carriedforward value of goods or finished goods on consignment that are not considered “sold” at the end of the period (if the consignor applies the periodic inventory system).

Credit:

- Value of goods, finished goods on consignment, rendered services that are considered “sold”;

- Value of goods, finished goods and services sent or rendered and returned by customers;

- Carriedforward value of goods and finished goods on consignment and rendered services rendered which are not considered “sold” at the beginning of the period (if the consignor applies the periodic inventory system).

Debit balance:

Value of goods and finished goods on consignment and rendered services considered “sold” in the period.

Article 30. Rules for accounting of fixed assets, investment property and construction in progress

1. Fixed assets, investment property and construction in progress must be monitored, recorded, managed and used in accordance with applicable regulations of law.

2. The sources of fixed assets shall be monitored as the basis of depreciation following the rules below:

- If the fixed assets are acquired from loan or owner's equity and serve the enterprise’s business operation, their depreciation shall be aggregated with operating expenses;

- If the fix assets are derived from the welfare fund or science and technology development fund, their depreciation shall be recorded as decreases in such funds.

3. Fixed assets and investment property shall be classified according to their purposes. If an asset is used for multiple purposes, e.g. a mixed-use building for offices, lease and sale, its fair value (every part) shall be estimated in conformity with its purposes.

- If a major part of the asset is used for a specific purpose that is different from those of the other parts, the entire asset shall be classified according to such major part;

- If there is any change to purposes of parts of an asset, the asset shall be re-classified according to their purposes.

4. Fixed assets, investment property and construction in progress related to foreign currencies shall be accounted for in accordance with Article 52 of this Circular.

Article 31. Account 211 – Fixed assets

1. Rules for accounting:

a) This account is reflect current value, decreases and increases in costs of total tangible fixed assets and intangible fixed assets owned by the enterprise and finance lease assets.

1.1. Fixed assets are labor materials in physical or material and immaterial forms and qualified as fixed assets (except some special assets).

a) Tangible fixed assets mean assets in material forms that are owned by the enterprise, serving its business operation or other activities and meet all tangible fixed asset criteria.

Standalone Tangible assets, parts incorporated in a system which will not be functional without any of those parts will be considered fixed assets if they satisfy all of the following conditions:

- Future economic benefits will surely be obtained;

- Their costs are reliably determined;

- Their useful life is at least 1 year;

- Their values are conformable with applicable regulations.

In the cases where parts of a system have different useful life and the system is still functional without certain parts and each part must be separately managed, each part will be considered a separate tangible fixed asset if it satisfies all four fixed asset criteria.

Each working animal or producing animal will be considered a separate tangible fixed asset if it satisfies all four fixed asset criteria.

Each piece of perennial plantation or perennial plant will be considered a separate tangible fixed asset if it satisfies all four fixed asset criteria.

b) Intangible fixed assets are assets without physical form but the value of which can be determined and which are held and used by the enterprises in their business or leased out to other entities and satisfy all intangible fixed asset criteria.

An intangible asset will be considered an intangible fixed asset if it satisfies all four criteria specified in (a).

c) Finance lease assets.

- Finance lease: a lease where the lessor transfers most of the risks and benefits associated with the asset ownership to the lessee. Ownership of the asset may be transferred at the end of the lease term.

- Cases that usually lead to a finance lease contract:

+ The lessor transfers the ownership of the asset to the lessee upon expiration the lease term;

+ At the inception of the lease, the lessee has an option to purchase the asset at a price which is expected to lower than the fair value of the asset upon expiration of the lease term;

+ The lease term makes up the major part of the economic life of the asset even its ownership title is not transferred;

+ At the inception of the lease, the rent makes up the most part of the fair value of the asset;

+ The leased asset is of a special category which can only be used by the lessee without any major modification or repair.

- An asset lease contract shall be considered a finance lease contract if it meets at least one of three criteria below:

+ The lessee terminates the contract and pay damages to the lessor;

+ The lessee makes an income from or loss on change of remaining fair value of the asset;

+ The lessee is able to continue leasing the asset after the lease contract expires at a rent lower than the market rent. Lease of assets which are land use rights (LUR) shall be classified as operating lease.

- Finance lease assets are fixed assets that are not owned by the enterprise but the enterprise is responsible for its management and uses them as if they are owned by it.

1.2. Value of fixed assets shall be recorded to account 211 according to their costs. Accountants shall specify costs of each category of fixed assets and each fixed asset. The cost of a fixed asset shall be determined according to its source as follows:

1.2.1. Tangible fixed asset

a) The cost of a tangible fixed asset purchase comprises buying price (excluding discounts), taxes (excluding refundable taxes) and directly attributable costs of putting the asset into the ready-for-use state such as site preparation, initial delivery and material handling, installation or testing (excluding value of products or scraps obtained from testing), payments for experts and directly attributable costs. Interest expense incurred upon purchased of a finished fixed asset, which can be used immediately without installation or testing) shall not be capitalized as cost of fixed assets.

- The cost of a purchased tangible fixed asset paid by instalment equals (=) asked price (original lump sum price) plus (+) directly attributable costs of putting such asset into the ready-for-use state (excluding refundable taxes). The difference between the instalment price and asked price shall be gradually included in operating expenses according to the payment schedule.

- Cost fixed assets that are real estate: When buying a piece of real property, the value of LUR and property on land shall be separated as prescribed by law. The property on land shall be recorded to as tangible fixed assets; the LUR value shall be recorded as an intangible fixed asset or accrued expense as the case may be.

b) Costs of tangible fixed assets derived from capital construction

- The cost of a fixed asset under contract awarding equals the final price for the building work plus (+) relevant costs and registration fee (if any). The cost of a fixed asset which is a working animal, producing animal or perennial plantation equals (=) total expenditure on such animal or plantation plus (+) relevant direct costs.

- Self-constructed or self-produced tangible fixed assets:

The cost of a self-constructed tangible fixed asset is the final value of the building work when it is put into operation. In the cases where a fixed asset is put into operation without a financial statement, the enterprise shall record the provisional cost of the fixed asset according to the construction costs. After the financial statement is approved, the difference (if any) will be recorded as an increase or decrease to the cost of the fixed asset.

The cost of a self-produced tangible fixed asset equals (=) the actual prime cost of the asset plus (+) relevant direct costs of putting such asset into the ready-for-use state.

- In above both cases, the cost of the fixed asset is inclusive of installation and testing costs (excluding value of products or scraps obtained from experimental production or testing). Internal profits and unreasonable expenses (wasted raw materials, labor or other costs in excess of the normal rate arising during the self-construction or self-production process) shall not be included in the cost of the tangible fixed asset.

c) The cost of a tangible fixed asset purchased in the form of exchange for a dissimilar tangible fixed asset or another asset shall be determined according to the fair value of the tangible fixed asset received or the fair value of the offered asset after adjusting the cash amounts or cash equivalents which are additionally paid or received plus (+) directly attributable costs of putting such asset into ready-for-use state (excluding refundable taxes).

The cost of a tangible fixed asset purchased in the form of exchange for similar one, or possibly formed through its sale in exchange for ownership of a similar asset (similar assets are those with similar utilities, in the same business field and having equivalent value). In this case, no profit or loss is recorded during the exchange. The cost of the fixed asset received equals (=) the remaining value of the offered asset.

d) The cost of a transferred tangible fixed asset equals (=) remaining book value provided by the transferor or actual value verified by the transfer council or a professional valuation organization plus (+) directly attributable costs (transport, material handling, upgrade, installation, testing, registration fee, etc,. paid by the transferee by the time the asset is put into the ready-for-use state.

dd) The cost of a tangible fixed asset contributed as capital or returned as capital is the value assessed by founding members/partners or shareholders or agreed by the enterprise and the contributor or assessed by a professional valuation organization and approved by the founding members/partners or shareholders.

e) The cost of a tangible fixed asset which is in surplus or donated equals (=) actual value assessed by the transfer council or a professional valuation organization plus (+) directly-attributable expenses (transport, material handling, installation, testing or registration fee paid by the recipient by the time the asset is put into the ready-to-use state)

1.2.2. Finance lease fixed assets

a) The cost of a finance lease asset equals (=) fair value of the asset or current minimum rent (if the fair value is greater than minimum rent) plus (+) initial direct costs of finance lease. If input VAT is deductible, the minimum rent is exclusive of VAT payable to the lessor.

When calculating the minimum rent, the enterprise may use the implicit interest rate or interest rate stated in the lease contract or the incremental borrowing interest rate of the lessee.

b) Non-deductible VAT on a finance lease fixed asset shall be recorded as follows:

- If non-deductible input VAT paid as a lump sum when the leased asset is recorded, the cost of the leased asset will be inclusive of VAT;

- If input VAT is paid by instalment, it will be recorded to operating expenses in the period according to depreciation of the finance lease asset.

c) Finance lease liabilities recorded to account 3412 are exclusive of input VAT.

d) Values of operating lease assets shall not be recorded to this account.

1.2.3. Intangible fixed assets

The cost of an intangible fixed asset comprises all costs incurred by the enterprise to acquire such intangible fixed asset by the expected time the asset is put into use.

a) The cost of an intangible fixed asset paid at asked prices, paid by instalment or by exchange, intangible fixed asset donated or contributed as capital or received as capital, intangible fixed asset in surplus, etc. shall be determined in accordance with 1.2.1.

b) The cost of an intangible fixed asset acquired by exchange or payment with financial instruments is the fair value stated of such financial instruments.

c) The cost of an intangible fixed asset which is LUR is the payment for such LUR (including payments to the transferor, cost of land clearance, compensation, land leveling, registration fee, etc.) or the amount agreed by contracting parties when contributing capital. The determination of LUR as an intangible fixed asset shall comply with relevant regulations of law.

d) If an asset is qualified as an intangible fixed asset, the cost incurred during the development stage will be recorded to account 241 “Construction in progress” (2412). At the end of the development stage, it shall be recorded Dr 2113 "Intangible fixed assets". If it is not qualified as an intangible fixed asset, the cost shall be included in operating expenses in the period or distributed as prescribed by law.

dd) The costs paid with an aim to generate future economic benefits for the enterprise, including enterprise establishment cost, personnel-training cost and advertising cost incurred before the enterprise is put into operation and costs of relocation, shall be recorded as operating expenses in the period.

e) The cost related to an intangible asset recorded by the enterprise to determine the business performance of the previous period must not be recorded again as its cost.

g) Trademarks, brand names, distribution right, customer list and similar items established by the enterprise shall not be recorded as intangible fixed assets.

1.3. Calculation and depreciation of fixed assets shall comply with effective regulations of law.

The lessee shall periodically include depreciation of finance lease assets in the enterprise’s operating expenses on the basis of a consistent depreciation policy. If it not certain that the lessee shall acquire the ownership of the asset upon expiration of the lease term, the leased asset shall be depreciated according to the lease term if the lease term is shorter than the useful life of the leased asset.

1.4. Any cost related to intangible fixed assets incurred after initial recognition must be recorded as operating expenses in the period, unless it satisfies all of the following criteria, in which case such cost will be recorded as an increase in the cost of the intangible fixed asset:

- The cost possibly causes the fixed asset to generate more future economic benefits than the original level;

- The cost is certain and associated with a specific intangible asset.

Costs incurred after initial recognition related to purchased assets that are trademarks, brand names, distribution right, customer list and similar items in nature are always recorded as operating expenses in the period.

1.5. In the cases where a purchased fixed asset consists of a building or structure associated with LUR, the value of the building or structure has to be separately recorded as cost of tangible fixed asset (account 2111) and value of LUR as cost of intangible fixed asset (account 2113)

1.6. An enterprise may only change fixed asset costs in accordance with applicable financial regulations.

1.7. Any increase or decrease in tangible fixed assets must be made into a written document and all procedures have to be completed.

1.8. Tangible fixed assets must be specific in terms of category and location. To be specific:

- Tangible fixed assets include: houses, structures, machinery, equipment, transmission devices, management instruments, perennial plants, working animals, producing animals and other tangible fixed assets.

- Intangible fixed assets include: distribution rights, copyrights, patent, trademarks, software programs, licenses and franchises; other intangible fixed assets.

1.9. Decrease in quantity of fixed assets of an enterprise due to sale, liquidation, losses, transferred to other enterprises, disassembly, etc. In any case of decrease in quantity of fixed assets, accountants shall follow all procedures and accurately determine the loss and income (if any). Relevant documents shall be recorded as follows:

- In case of sale of a fixed asset serving the enterprise’s business operation, the fixed asset sold is usually unnecessary or ineffective. All procedures prescribed by law must be followed when selling a fixed asset.

- A liquidated fixed asset is one that is no longer usable, technologically obsolete or no longer suitable for the enterprise’s operation. When liquidating a fixed asset, the enterprise must issue a liquidation decision and establish a liquidation council. The liquidation council shall organize the liquidation in accordance with procedures and issue a liquidation report.

The revenues shall record the liquidation similarly to fixed asset sale according to the liquidation report and relevant documents.

1.10. The cause of any shortage or surplus of tangible fixed assets must be identified. The shortage or surplus must be accurately and promptly recorded according to the fixed asset inventory report and the verdict issued by the inventory council:

a) In case of surplus:

- If the surplus is due to omission, an increase in fixed assets shall be recorded on a case-by-case basis.

- If the excess fixed asset is owned by another enterprise, such enterprise must be promptly notified. The asset will be kept by the accountant before it is returned to its owner.

- If the owner of an excess fixed asset is not identified, it will be recorded as an increase in other income according to its fair value.

b) In case of shortage of fixed assets, the cause and responsible person must be identified and properly dealt with.

Accountants shall determine the cost, depreciation of the fixed asset as the basis for recording a decrease in fixed assets.

2. Structure and contents of account 211 – Fixed assets

Debit:

- Increases in costs of fixed assets due to purchase or exchange of fixed assets, completion of capital construction, capital contribution, donation, etc.

- Increases in costs of fixed assets due to construction and installation, upgrade or reassessment.

Credit:

- Decreases in fixed assets due to transfer, exchange, sale, liquidation or contribution as capital to other entities, etc.

- Decreases costs of fixed assets due to removal of certain parts or reassessment.

Debit balance:

Closing fixed assets cost.

Account 211 –Fixed assets comprising three sub-accounts:

- Account 2111 – Tangible fixed assets: reflecting current value, decreases and increases in costs of all tangible fixed assets owned by the enterprise.

- Account 2112 – Finance lease assets: reflecting costs of fixed assets leased by the enterprise in the form of finance lease.

- Account 2113 – Intangible fixed assets: reflecting current value, decreases and increases in costs of all intangible fixed assets owned by the enterprise.

Article 32. Account 214 – Depreciation of fixed assets

1. Rules for accounting

a) This account reflects increases and decreases in depreciation value and accumulated depreciation of fixed assets and investment property due to depreciation of fixed assets, investment property and other increases or decreases in depreciation of fixed assets or investment property.

b) In principle, all fixed assets or investment property for lease by the enterprise related to its business operation (including unused, unnecessary or liquidation-pending assets) must be depreciated as prescribed in regulations in force. The depreciation of fixed assets serving the enterprise’s business operation and depreciation of investment property shall be recorded as operating expenses in the period; depreciation of unused, unnecessary, or liquidation-pending fixed assets shall be recorded as other expenses. It is not required that depreciation of fixed assets used for welfare purposes be recorded as operating expenses but as decrease in the source of such fixed assets.

c) Pursuant to regulations of law and the enterprise’s requirements, one of depreciation method suitable for every fixed asset and investment property and the enterprise’s financial capacity shall be applied chosen in order to develop the business and ensure capital recoupment.

The depreciation method chosen must be applied consistently and may be changed in case of change in economic benefits from fixed assets or investment property.

d) The useful life and depreciation method must be re-considered at least at the end of every fiscal year. If the estimated useful life of the asset is significantly different from the previous estimated one, the useful life must be adjusted accordingly. The method for depreciation of fixed assets shall be changed once in case of significant change in economic benefits of the fixed assets. In such case, the depreciation of the current year and succeeding years shall be adjusted and they shall be explained in the financial statement.

dd) If a fixed asset is fully depreciated but still functional, its depreciation must be terminated. If a fixed asset is not fully depreciated but is damaged and pending liquidation, it is required to identify the cause and responsibility for compensation; and the remaining value of the fixed asset which has not been recovered or compensated shall be covered by the proceeds from its liquidation and the compensation decided by enterprise’s manager. If the proceeds from liquidation or compensation is not enough to cover the remaining value of the fixed asset, the difference shall be considered a loss on fixed asset liquidation and recorded as other expenses.

e) Depreciation of intangible fixed assets shall depend on their useful time (according to the contract, agreement or decision of the competent agency)

g) Regarding finance lease assets, the lessee must depreciate them over the lease term and recorded them as operating expenses in order to fully recoup capital.

h) Investment property for operating lease shall be depreciated and recorded as cost of goods sold in the period. The enterprise may estimate the depreciation time of similar real estate used by the owner to determine the depreciation time and depreciation method for its investment property. If an investment property is held for capital appreciation, the enterprise shall not depreciate it but determine the loss due to depreciation. When there is evidence that the price of investment property increases, the enterprise may record such increase, which must not exceed the original cost of the investment property.

2. Structure and contents of account 214 – Depreciation of fixed assets

Debit: Decreases in depreciation of fixed assets, investment property liquidated, sold, transferred to affiliated units, stakes in other entities, etc.

Credit: Increases in depreciation of fixed assets and investment property etc.

Debit balance: Closing accrued depreciation of existing fixed assets and investment property of the enterprise.

Account 214 – Depreciation of fixed assets, comprising four sub-accounts:

- Account 2141 – Depreciation of tangible fixed assets: reflecting depreciation of tangible fixed asset, increases and decreases thereof.

- Account 2142 – Depreciation of finance lease assets: reflecting depreciation of tangible fixed assets, increases and decreases thereof.

- Account 2143 – Depreciation of intangible fixed assets: reflecting depreciation of intangible fixed asset, increases and decreases thereof.

- Account 2147 – Depreciation of investment property: reflecting depreciation of investment property during the operating lease process, increases and decrease thereof.

Article 33. Account 217 – Investment property

1. Rules for accounting

1.1 This account reflects current value, increases and decreases in investment property of an enterprise according to their costs, which are accounted for similarly to fixed assets. Investment property includes LUR, building, part of a building or both land and building, infrastructure held by the owner or by the lessee under a finance lease contract to earn rentals or for capital appreciation, rather than for:

- Serving the enterprise’s business operation; or

- Sale in the ordinary course of business.

1.2. This account reflects real estate qualified as investment property. Property held for sale in the ordinary course of business or being built for sale in the near future, real estate used by the owner, unfinished real estate intended to be used as investment property in the future shall not be recorded to this account.

Investment property shall be recognised as an asset when both of the following conditions are met:

- Future economic benefits associated with the investment property are certain;

- The cost of the investment property can be reliably determined.

1.3. A piece of investment property shall be recorded to this account at its cost. The cost of an investment property means the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire the investment property at the time of its acquisition or construction.

- The cost of a piece of investment property shall be determined on a case-by-case basis as follows:

+ The cost of purchased investment property comprises its buying purchase price, directly attributable costs such as consultancy charges, registration fee and relevant fees, etc.

+ In case of payment by instalment, the cost of the investment property shall be the asked price. The difference between the instalment price and asked price shall be recorded as financial expense, unless it is included in the cost of the investment property;

+ The cost of self-constructed investment property is its actual prime cost of and directly attributable costs on its completion date;

- The following items must not be included in the cost of investment property:

+ Start-up costs (unless they are necessary to bring the property to its ready-to-use state);

+ Costs incurred when the property is put into operation for the first time until its operation is stable as expected.

1.4. Subsequent expenditures related to the investment property shall be recorded as operating expenses in the period, unless it is certain that they will reap future economic benefits more than the initially assessed operation, in which case they may be recorded as increases in the cost of the investment property.

1.5. During the operating lease period, the investment property must be depreciated and such depreciation shall be recorded to cost of goods sold in the period (including suspension period). The enterprise may estimate the useful life and determine the appropriate depreciation method according to similar owner-occupied property.

- In the cases where the enterprise records revenues from the total advance payment for the lease of the investment property, accountants shall estimate the corresponding cost (including the pre-determined depreciation).

- The cost of an investment property for lease consists of investment property depreciation and directly attributable costs such as: outsourcing expense, payment for the property managers, depreciation of auxiliary works serving the investment property lease.

1.6. Property held for capital appreciation shall not be depreciated. In the cases where there is evidence that the investment property falls against market fair value and the decrease can by reliably determined, decrease in cost of the investment property and the loss shall be recorded to cost of goods sold (similarly to provision for real property held for sale).

1.7. With regard to purchased investment property which must be built, renovated or upgraded before use for investment purposes, its value, buying expenses , costs of purchasing and construction, renovation or upgrade shall be recorded to account 241 “Construction in progress”. Upon completion of the construction, renovation or upgrading process, the cost of the investment property must be determined and transferred to account 217 “Investment property".

1.8. The conversion of owner-occupied property into investment property or from investment property into owner-occupied property or inventory shall be made only if there is a change in its purposes such as:

- The investment property shall be converted into owner-occupied property when the owner begins to use it;

- The investment property shall be converted into inventory when the owner begins to sell it;

- The owner-occupied property shall be converted into investment property when the owner stops using it and leases it out to another party;

- Inventory shall be converted into investment property when the owner begins to lease it out to another party;

- A real estate shall be converted into investment property when it is completed, transferred and put into investment.

The conversion between investment property and owner-occupied property or inventory does not change the book value and cost of the converted property in assessment or preparation of financial statements.

1.9. When the enterprise decides to sell an investment property without repair, renovation or upgrade, the investment property will be recorded to account 217 “Investment property” until it is sold (not converted into inventory).

1.10. The VAT-exclusive selling price (if the enterprise applies credit-invoice method) or total price (if the enterprise pays VAT directly) of an investment property shall be recorded as revenue. In case of payment under an instalment plan, the revenue is the asked price. The difference between the amount payable and the asked price shall be recorded as unreceived interest.

1.11. A decrease in investment property shall be recorded when:

- A piece of investment property is converted into inventory or owner-occupied property;

- A piece of investment property is sold or liquidated;

- The finance lease term expires and the investment property is returned to the lessor.

1.12. Each enterprise shall compile a list of investment property for lease or held for capital appreciation, depreciate them or determine loss consistently in the fiscal year.

2. Structure and contents of account 217 – Investment property

Debit: Increases in costs of investment property in the period.

Credit: Decreases in costs of investment property in the period.

Debit balance: Closing costs of existing investment property.

Article 34. Account 228 – Capital contributions

1. Rules for accounting

1.1. This account reflects capital contributions to other entities and recoupment thereof.

Capital contributions include:

a) Capital contribution to jointly controlled entities and associate companies

- This account reflects capital contributed to jointly controlled entities and associate companies and recoupment thereof. This account does not reflect transactions under business cooperation contract (BCC) without establishment of a legal entity.

- A jointly controlled entity is established by jointly controlled entities who have joint control over financial and operating policies and is an affiliated unit having legal status. The jointly controlled entity must do accounting separately as prescribed in regulations of applicable accounting laws, take responsibility for control of its assets, liabilities, revenues, other income and expenses. Each jointly controlled entity shall receive a portion of operating outcome of the joint venture according to the jointly controlled entity agreement.

- An investment shall be classified as investment in an associate company when the investor directly or indirectly holds from 20% to under 50% voting shares of the investee without any other agreement or the investor has significant influence over the investee.

- When the investor no longer has joint control, a decrease in investment in jointly controlled entities shall be recorded; When the investor no longer has significant influence over the investee or the holding of the investee’s voting shares is not sufficient, a decrease in investment in associate companies shall be recorded.

- Directly attributable costs of sale or liquidation of investments in jointly controlled entities or associate companies shall be recorded as financial expenses incurred in the period.

- In case of liquidation, sale, withdrawal of investments in jointly controlled entities or associates, a decrease in contributed capital shall be recorded according to the value of assets contributed. The difference between the fair value of recovered amount and the book value of an investment shall be recorded as financial income (in case of profit) or financial expenses (in case of loss).

b) Other Investments include investments in equity instruments of other entities without acquisition of joint control, significant influence over the investee; Investments in the form of gold, silver, rare metals, gemstones shall not be classified as inventory.

1.2. An investment shall be recorded at its historical cost which comprises buying price plus (+) directly attributable costs (if any), such as transactions, brokerage, consultancy, auditing, fees, taxes and banking fees, etc. In case of investment of a non-monetary asset, the cost of the investment shall be recorded according to the fair value of the non-monetary asset at that time.1.3. In the cases where an investors buys a stake in a jointly controlled entity or associate company, the price of the stake recorded by the investor shall comprise its fair value on the transaction date, debts that are paid or recognized, equity instruments in exchange of control of the jointly controlled entity and significant influence over the associate company plus (+) directly attributable costs.

1.4. Forms of investment:

a) Capital contribution in other entities (raised by the investee): The contributor’s assets shall be recorded in the investee’s financial position statement.

b) Purchase of stake (purchase of owner’s equity): The buyer’s assets (the investor or transferee) shall be transferred to the seller (the transferor) without being recorded in the financial position statement of the instrument issuer (investee).

1.5. In case of investment of a non-monetary asset, the investor must apply an accounting suitable for such investment. To be specific:

a) If a non-monetary asset is contributed as capital, the investor must re-assess such asset under agreement. The difference between the book value or remaining value and re-assessed value of the asset shall be recorded as other income or other expense.

b) In case of stake purchase paid with a non-monetary asset:

- If the non-monetary asset used as payment is inventory, the investor shall record the transaction as barter (revenue and cost of inventory exchanged for the stake);

- If the non-monetary asset used as payment is a fixed asset or investment property, the investor shall record the transaction as a sale of fixed asset or investment property (revenue, other income, cost, other expenses, etc.);

- If the non-monetary asset used as payment is an equity instrument (shares) or a debt instrument (bonds, receivables, etc), the investor record the transaction as a liquidation or sale of stakes (profit or loss recorded as financial income or financial expense).

1.6. Accountants shall keep a separate log of stake in other entities. A stake in another entity shall be recorded when the ownership is acquired by the investor, which means the time:

- listed securities are recorded at the time of matching (T+0);

- ownership of unlisted securities or other investments is required as prescribed by law.

1.7. The investor shall fully and promptly record all dividends and distributed profits in the financial statement. The dividends and distributed profits shall be recorded as follows:

a) Dividends and distributed profits in the form of cash or non-monetary asset received after investment date shall be recorded as financial income according to the fair value on the date of receipt;

b) Dividends and distributed profits in the form of cash or non-monetary asset received before investment date shall be recorded as a decrease in investment value instead of financial income.

c) If shares are paid as dividends, only the quantity of shares specified in the notes to financial statement shall be monitored; Do not record an increase in investment value and financial income.

1.8. Costs of financial investments upon liquidation or sale shall be determined according to the weighted mean.

1.9. When preparing a financial statement, the enterprise shall determine the value of loss-making investments to make provisions against impairment of investment in other entities.

2. Structure and contents of account 228 – Investments in other entities:

Debit:

- Increases in investments in jointly controlled entities;

- Increases in historical cost of investments in associate companies;

- Increases in other investments.

Credit:

- Decreases in investments in jointly controlled entities because of withdrawal or transfer that leads to loss of control over the investee;

- Decreases in historical cost of investments in associate companies because of withdrawal or receipt of benefits other than distributed profit;

- Decreases in historical cost of investments in associate companies because of full or partial liquidation of the investments that leads to loss of significant influence over the investee;

- Decreases in other investments.

Debit balance:

- Closing balance of investment in jointly controlled entities;

- Closing historical cost of investments in associate companies;

- Closing values of other investments.

Account 228 – “Investments in other entities” comprises two sub-accounts:

- Account 2281 – Investments in jointly controlled entities and associate companies: reflecting capital contribution in jointly controlled entities and associate companies and recoupment thereof.

- Account 2288 – Other investments: Current values, increases and decreases in equity instruments of other entities over which the enterprise have no control or significant influence; Other investments in the form of gold, silver, rare metals, gemstones shall not be classified as inventory.

Article 35. BBC accounting

1. Rules for accounting

1.1. BCC means a written agreement two or more parties to carry out certain business activities without establishment of a new legal entity. Such activities may be jointly controlled by capital contributors under a jointly controlled entity agreement or any of the parties.

1.2. A BCC may be executed by cooperation in development assets or other business activities. Contracting parties to a BCC may reach an agreement to divide revenues, products or after-tax profits.

1.3. In any cases, money or assets received from other entities as contribution to the MORTGAGOR shall be recorded as liabilities instead of owner's equity.

1.4. BCC in the form of jointly controlled assets

a) Jointly controlled asset under BCC means any asset which is purchased or constructed by venturers serving the jointly controlled entity’s business operation and bring benefits to parties thereto in accordance with the jointly controlled entity contract. Venturers shall record their portions of jointly controlled assets as their assets account on their financial statements.

b) Each venturer may take a share of the output from the jointly controlled assets and bears an agreed share of the expenses incurred under the contract.

c) A venturer must keep records in the same system of accounting records and record in its financial statements:

- Its share of the jointly controlled assets classified according to the nature of the assets;

- Any liabilities it has incurred;

- Its share of any liabilities incurred jointly with the other venturers in the relation to the jointly controlled entity;

- Any income from the sale or use of its share of the output of the venture, together with its share of expenses incurred by the jointly controlled entity;

- Any expenses incurred in respect of its interest in the jointly controlled entity.

With regard to fixed asset or investment property which is contributed to a BCC and the ownership of the contributor is not converted to the joint ownership of BCC venturers, the recipient shall keep records of assets without recording any increase in assets or capital contribution; the contributor shall not record a decrease in assets in the accounting records and only keep records of the locations of assets.

With regard to fixed asset or investment property which is contributed to a BCC and the ownership of the contributor is converted into joint ownership; during construction of jointly controlled assets, the contributor shall record a decrease in assets in the accounting records and the value of assets shall be recorded to construction in progress. After the jointly controlled asset is put into operation, the venturers shall record increases in assets in conformity with their use purposes according to value of their assets' shares.

1.5. BCC in the form of jointly controlled operations

a) BCC in the form of jointly controlled operations is a jointly controlled entity which does not require establishment of a new business entity. Venturers shall fulfill their obligations and exercise their rights according to the BCC. The jointly controlled entity activities may be carried out alongside other ordinary activities of each venturer.

b) Each jointly controlled entity contract shall bear its own expenses incurred from its share in jointly controlled operations. The joint expenses (if any) shall be divided among venturers according to the BCC

c) A BCC venturer must include in accounting records and record in its financial statements:

- The assets of jointly controlled entity under its control;

- The liabilities incurred;

- Its share of income from the sale of goods or services by the jointly controlled entity;

- Expenses incurred.

d) Every joint expense incurred shall be accounted for. If the BCC stipulate division of expense, a Table of expenses division shall be made, certified and held by every venturer (original copy). Each venture shall account for expenses divided under the BCC according to the table of expense division together with lawful original documents.

dd) If the BCC stipulates division of products, a Table of shares of products shall be made, certified quantity or specifications of shares of products from BCC and held by every venturer (original copy). Whenever a product is delivered, the venturers shall make out a delivery note. The delivery note is the basis for keeping records and contract finalization.

e) Venturers shall deal with joint expenses and income similarly to those of jointly controlled operations.

1.6. Division of after-tax profit on the BCC

a) A BCC on which after-tax profit is divided is usually in the form of jointly controlled operations or individually controlled operations. The venturers shall appoint one of them to as the bookkeeping venturer which is in charge of recording all transactions of the BBC, revenues, expenses and income statement of the BBC and preparing tax declarations. When such a BBC is concluded, the venturers take into account the risks due to:

- Any expenses which is not included in the taxable expense due to failure in transfer of assets among venturers, for example:

+ Depreciation of certain fixed assets is not accepted by the tax authority because the transferor fails to transfer ownership of the fixed assets to the bookkeeping venturer;

+ Certain expenses of the venturers are accepted by the tax authority because the input invoices do not bear the name of the bookkeeping venturer;

+ Certain expenses of the venturers cannot be transferred to the bookkeeping venturer due legal barriers, e.g. the venturer has an invoice for payment of land levies but the law does not allow such venturer to sublease the piece of land to the bookkeeping venturer and thus the land levies cannot be included in the BBC expense.

- Policy-related risks:

+ The bookkeeping venturer may incur accrued losses, but the BCC makes a profit. In this case, instead of offsetting the profit on the BBC against loss on other operations, the enterprise shall pay corporate income tax on the BCC; If the BCC is making a loss and other operations are making a profit, the enterprise might not be allowed to offset the loss against its distributed profit on the BCC;

+ If other venturers use fixed assets to serve the BCC operation, their depreciation might not be recorded as deductible expenses because they do not serve the enterprise’s business operation (does not match revenues from other operations).

b) If the BCC stipulates division of after-tax profit, the bookkeeping venturer shall follow these rules:

- If the BCC stipulates that other venturers will receive a fixed amount of profit regardless of performance of the BCC, the nature of the BCC is a lease. In this case, the bookkeeping venturer is entitled to administer and influence the BCC activities, apply accounting method for lease of assets, record payables to other venturers as expenses to determine the business performance of the period. To be specific:

+ Record all revenues, expenses and after-tax profit on the BCC on its income statement;

+ Record all after-tax profit on the BCC as “Undistributed after-tax profit” on the financial position statement.

+ Other venturers shall record their shares of profit on the BCC as revenues from lease of assets.

- If the BCC stipulates that other venturers will receive their shares of profits if the BCC generate profits and any incur losses on the BCC, the nature of the BCC is division of revenues and expenses where the parties usually have the right and ability to jointly control the activities as well as the cash flow of the BCC. The bookkeeping venturer shall record revenues, expenses and business performance of the period and provide evidence for tax declaration to other venturers. To be specific:

+ All revenues, expenses and shares of profits on the BCC shall be included in their income statements; the bookkeeping venturer shall provide copies of documents about fulfillment in liabilities of the BBC to government budget to other venturers in order to serve their tax declaration;

+ Undistributed after-tax profits on financial position statement only include shares of after-tax profit of each venturer.

+ Other venturers shall send reports on their shares of income and expenses whose tax liabilities are covered as stated in the income statements to the tax authority in order to adjust their corporate income tax payables.

1.7. Any difference between the contributed capital and fair value received shall be recorded as other income or other expenses.

Article 36. Account 229 – Provision for impairment of assets

1. Rules for accounting

This account reflects current values, increases or decreases in provision for impairment of assets, including:

a) Provision for devaluation of trading securities: a provision for impairment caused by devaluation of trading securities of an enterprise.

b) Provision for impairment of investments in other entities: a provision for impairment because the investee makes a loss that leads to irrecoverability of the investor’ investment or provision for decline in investments.

- With regard to investments in a jointly controlled entity or an associate company, the investor only makes such provision when the jointly controlled entity or associate company makes a loss that leads to irrecoverability of the investor’s investment according to applicable regulations of law.

- Provision for long-term investments (other than trade securities) with which the investor does not control or have significant influence on the investee shall be made as follows:

+ If an investment in listed shares or the fair value of the investment can be reliably determined, the provision shall be made according to the market value of the shares (similarly to provision for devaluation of trading securities);

+ If the fair value of the investment cannot be determined at the reporting time, provision allowance shall be made according to the loss incurred by the investee (provision for impairment of investments in other entities).

c) Allowance for bad debts: a provision for receivables and receivable equivalents that are bad debts.

d) Provision against devaluation of inventory: a provision against devaluation of inventory due to decrease in net realizable value against historical cost of inventory.

1.2. Rules for accounting of provisions for devaluation of trading securities

a) The enterprise may make a provision for probable impairment if there is evident that the market value of held for trading securities of the enterprise decline against the book value.

b) Requirements, bases and level of provision or provision reversal shall comply with regulations of law.

c) The creation or reversal of provision for devaluation of trading securities shall be made while preparing the financial statement. To be specific:

- If the provision for the current year is higher than that in the accounting records, the enterprise shall create an additional provision and record it as financial expense of the period.

- If the provision for the current year is lower than the unused provision for the previous year, the enterprise shall reverse such difference and record it as a decrease in financial expense.

1.3. Rules for accounting of provisions against impairments of investments in other entities

a) If the investee is a parent company, the investor shall create a provision for impairments of investment in other entities according to the consolidated financial statement of such parent company. If the investee is an independent company without subsidiaries, the investor shall create a provision for impairments of investments in other entities according to the consolidated financial statement of such investee.

b) The creation or reversal of provision for impairments of each investment in other entities shall be made separately while preparing the financial statement. To be specific:

- If the provision for the current year is higher than that in the accounting records, the enterprise shall create an additional provision and record it as financial expense of the period.

- If the provision for the current year is lower than the unused provision for the previous year, the enterprise shall reverse such difference and record it as a decrease in financial expense.

c) The difference between value of impairment of investments in other entities and the provision made shall be recorded as financial expense of the period.

1.4. Rules for accounting of allowance for bad debts:

a) When preparing a financial statement, the enterprise shall identify bad debts and other amounts similar to bad debts in nature to create or reverse allowance for bad debts.

b) The enterprise shall make allowance for bad debts when:

- An overdue debt under an economic contract, a loan agreement, a contractual commitment or a promissory note has been demanded for several times but has not been collected, even if there are no supporting documents or the debtor’s refuses to certify the debt or has disappeared. The overdue period of a doubtful debt requiring creation of provision shall be determined according to time limit for repayment of the principal specified in the original sale contract, regardless of debt rescheduling between contracting parties.

- The debt is not due but the debtor has gone bankrupt or is undergoing dissolution, or the debtor has disappeared.

c) Conditions and basis for making allowance for bad debts shall comply with applicable regulations of law.

d) The creation or reversal of allowance for bad debts shall be carried out while preparing the financial statement.

- If the closing allowance for bad debts is greater than that recorded in the accounting records, the difference shall be recorded as an increase in provision and increase in administration expenses of the enterprise.

- If the closing allowance for bad debts is smaller than that recorded in the accounting records, the difference shall be recorded as a decrease in provision and an decrease in administration expenses of the enterprise.

e) Regarding a bad debt that cannot be collected for multiple years after taking every measure possible and it is verified that the has become insolvent, the enterprise may remove it from its accounting books. The removal of bad debts shall comply with regulations of law and the enterprise’s charter. These bad debts shall be monitored in the administration system of the enterprise and presented in the notes to financial statement. If the enterprise is able to collect a debt after its removal, the collected amount shall be recorded to the account 711 "Other income".

g) When allowance for bad debts has been made, the enterprise shall use it to cover the loss on the bad debts. If such allowance is not sufficient, the uncovered loss shall be included in the enterprise’s administration expenses.

1.5. Rules for accounting of provision against devaluation of inventory

a) The enterprise shall create a provision against devaluation of inventory whenever there is evident that there is a decrease in net realizable value against the historical cost of inventory. Provision for devaluation of inventory means an estimated amount of devaluation of inventory against book value which is included in the operating expenses in order to compensating actual damage caused by such devaluation.

b) The provision against devaluation of inventory shall be created while preparing the financial statement. The creation of provision against devaluation of inventory must comply with applicable regulations of law.

c) The provision against devaluation of inventory shall be classified by type of supplies and products in stock. With regard to services in progress, provision against devaluation of inventory shall be classified by price.

d) Net realizable value (NRV) means the estimated selling price in the ordinary course of business minus (-) estimated cost creation of the product and selling expense.

dd) When preparing a financial statement, provision against devaluation of inventory shall be created according to quantity, historical cost and NRV of each type of supplies, goods or services in progress:

- If the closing provision against devaluation of inventory is greater than that recorded in the accounting records, the difference shall be recorded as an increase in provision and increase in cost of goods sold.

- If the closing provision against devaluation of inventory is smaller than that recorded in the accounting records, the difference shall be recorded as a decrease in provision and decrease in cost of goods sold.

e) When provision against devaluation of inventory has been made, the enterprise shall use such provision to cover the loss. If such provision is not sufficient, the uncovered loss shall be included in the cost of goods sold.

g) Provision against devaluation of inventory shall not be created for raw materials, tools and instruments used in capital construction or production if the products they are used to create will be sold at the same or higher price than their prime cost.

2. Structure and contents of account 229 – Provision for impairment of assets

Debit:

- Reversed difference between the provision of one period and unused provision of the previous period;

- Compensation for impairment of assets from created provision.

Credit:

Created provision for impairment of assets upon preparation of the financial statement.

Credit balance: Closing provision allowance for impairment of assets.

Account 229 – Provision for impairment of assets comprises 4 sub-accounts

Account 2291 – Provision for devaluation of trading securities: reflecting creation or reversal of provision for devaluation of trading securities.

Account 2292 – Provision for impairment of investment in other entities: reflecting creation or reversal of provision for loss of the investor’ capital because of the loss incurred by the investee or provision for devaluation of investments.

Account 2293 – Allowance for bad debts: reflecting creation or reversal of allowance for bad debts and the equivalents.

Account 2294 – provision against devaluation of inventory: reflecting creation of reversal of provision against devaluation of inventory.

Article 37. Account 241 – Construction in progress

1. Rules for accounting

a) This account reflects costs of capital construction projects (including costs of acquisition of new fixed assets, construction, repair, renovation, expansion or refurbishment of works), finance statements of capital construction projects of enterprises purchasing fixed assets, making investment in capital construction or making major repair of fixed assets.

Investment in capital construction and major repair of an enterprise’s fixed assets may be carried out by external contractors or by the enterprise itself. An enterprise that invests in capital construction itself shall record costs incurred during the construction or repair to this account.

b) Costs of execution of a capital construction project mean every cost of construction, repair, renovation, expansion or refurbishment of works, provided they are conformable with effective regulations of law and the market. Capital construction cost includes:

- Construction cost;

- Equipment cost.

- Cost of compensation, assistance and relocation;

- General administration cost;

- Cost of construction consultancy;

- Other expenses.

The account 241 shall specify each work, work item. Capital construction costs of each work item must be separately recorded and monitored from the commencement date until the date on which the work or work item is completed and put into operation.

c) When making investment in capital construction, construction and equipment costs of each work are usually accounted for separately; project management costs and other expenses are usually spent together. The must calculate and distribute the project management costs and other expenses of each work as follows:

- If the project management costs and other relevant expenses of each work can be identified, they shall be recorded to expense of such work;

- Project management costs and overheads related to multiple works shall be distributed amount the works according to certain criteria.

d) The cost of repair or maintenance of functional fixed assets shall be included in operating expenses of the period. Regarding periodic repair or maintenance that does not results in increase in the asset value, the enterprise may create a provision and included it to operating expenses.

dd) The investor of real property construction shall use this account to record cost of construction of fixed assets or investment property. In the cases where a piece of real property is used for multiple purposes (office, lease or sale, i.e. mixed-used building), the construction-directly attributable expenses still be recorded to the account 241. When the building work is completed and put into operation, the construction expenses shall be transferred in conformity with the nature of every asset according to its use.

e) Costs of construction in progress paid with foreign currency shall be recorded at the exchange rates at the time the capital construction work is completed and put into operation. In the cases where the enterprise pays the contractor in advance, the construction in progress in proportion to the advance payment shall be recorded at the actual exchange rate at the time of advance payment; the construction in progress in proportion to the remaining payment shall be recorded at the actual exchange rate at the time the capital construction work is completed and put into operation.

g) Exchange difference derived from capital construction investment before or after inauguration (including new investment and extension investment) shall be included in financial income (in case of profit) or financial expense (in case of loss) at that time.

h) In the cases where an investment project is cancelled, the enterprise must liquidate and recover the expenses of the project. The difference between actual investment and proceeds from liquidation shall be recorded to other expenses or compensated by responsible entities.

i) Other expenses such as such as capitalized interest, bidding expenses (after being offset against proceeds from selling bidding documents), dismantlement expenses (after being offset against recoverable scrap) shall be included in construction in progress.

k) In case of experimental production without creation of products, the cost of experimental production shall be included in construction in progress; if the experimental production does create products, the cost of experimental production shall be recorded to account 154 – Work in progress; the difference between the cost of experimental production and proceeds from the sale of products thereof shall be included in construction in progress.

Account 241 – Construction in progress, comprise 3 sub-accounts:

- Account 2411: Fixed assets acquisition: reflecting costs of acquisition of fixed assets that must be assembled and tested before put into use (including new and used fixed assets). If an acquired fixed asset needs additional investment before use, additional expenses will also be recorded to this account.

- Account 2412: Capital construction: reflecting capital construction investment. This account shall specify details of each building work and work item (for each asset acquired though investment) and capital construction expense of each asset.

- Account 2413: Major repairs of fixed assets: reflecting major repairs expenses of fixed assets. The costs of regular repairs of fixed assets shall be included in operating expenses of the period instead of this account.

2. Structure and contents of account 241 – Construction in progress

Debit:

- Cost of capital construction, purchase and major repair of fixed assets (tangible fixed assets and intangible fixed assets);

- Cost of purchase of investment property (if the construction investment stage is necessary);

- Investment in capital construction of investment property;

- Cost of renovation, upgrade, major repair of fixed assets and investment property.

Credit:

- Value of fixed assets acquired through capital construction or purchased and put into operation;

- Value of finished investment property acquired through capital construction;

- Value of rejected works and other rejected expenses.

- Carriedforward costs of renovation, upgrade, major repair of fixed assets and investment property after they are recorded to relevant accounts when the statement is approved.

Debit balance:

- Costs of construction projects and major repair of fixed assets and investment property in progress;

- Value of construction works and major repair of finished fixed assets and investment property that have not been put into operation or the statement has not been approved;

- Value of investment property in progress.

Article 38. Account 242 – Prepaid expenses

1. Rules for accounting

a) This account reflects expenses actually incurred but they are related to operation output of multiple accounting periods and the carryforward of which to operating expenses of subsequent accounting periods.

b) Prepaid expenses include:

- Prepaid expenses of infrastructure lease or operating lease (LUR, factories, warehouses, offices, shops and other fixed assets) to serve business operation in multiple accounting periods.

- Enterprise establishment expenses, training and advertising expenses incurred in before inauguration shall be distributed in accordance with effective regulations of law;

- Insurance expenses (insurance against conflagration and explosion, civil liability insurance of vehicle owners, car body insurance, assets insurance, etc.), and charges paid in advance by the enterprise for multiple accounting periods;

- Tools and supplies, reusable packaging materials or instruments for rent related to business operation of multiple accounting periods;

- Prepaid loan interest of multiple accounting periods;

- Cost of major repair of fixed assets not included in prepaid expenses;

- Research expenses and expenses incurred from development stage which are not qualified as intangible fixed assets if they may be gradually distributed according to effective regulations of law;

- Other prepaid expenses serving the business operation in multiple accounting periods.

c) The calculation and distribution of prepaid expenses to operating expenses of each accounting period must be based on the nature and extent of each type of expenses to select an appropriate method and criteria.

d) Each prepaid expenses incurred, spent and unspent of each accounting period shall be specified.

dd) With regard to prepaid expenses in foreign currencies, if it is evident at the report-preparing time that the seller is unable to provide goods or services and the enterprise will definitely have the prepaid expenses in foreign currencies returned, they shall be considered foreign currency monetary items and have to undergo reassessment according to the average transfer rate applied by the enterprise’s regular bank at the reporting time.

The determination of the average transfer rate and method for handling exchange difference due to reassessment of foreign currency monetary items are specified in Article 52 of this Circular.

2. Structure and contents of account 242 – Prepaid expenses

Debit: Prepaid expenses incurred in the period.

Credit: Prepaid expenses included in operating expenses in the period.

Debit balance: Prepaid expenses not included in operating expenses in the period.

Article 39. Rules for accounting of liabilities

1. Liabilities of an enterprise must be accounted for and sorted by according to payment schedule, creditor, currency and other factors required by the enterprise.

2. Liabilities shall be classified into trade payables, intra-company payables and other payables according to following rules:

a) Trade payables are those derived from purchase of goods, services or assets. These include amounts payable when importing through the trustee (in the import trust transaction);

b) Intra-company payables are amounts payables between superior units and affiliated units;

c) Other payables include payables that are non-commercial and not related to trade in goods or services:

- Payables related to financial expense, such as: interests, dividends and profits, financial investment expenses;

- Payables paid by third parties; payables which the trustor receives from relevant entities to pay for import-export trust transactions;

- Non-commercial payables, such as: non-monetary borrowings, fines, compensation, assets in surplus pending resolution, social insurance, health insurance, unemployment insurance, or union funds, etc.

3. When preparing a financial statement, the amounts payable shall be classified into long-term payables or short-term payables according to their remaining terms.

4. Currencies, creditors of payables in foreign currencies shall be specified as follows:

- Liabilities (credit side of accounts payable) shall be converted into the accounting currency at the actual exchange rate applied at that time.

An advance payment to a seller in foreign currency shall be recorded to Cr 331 at the recorded specific exchange rate applied at the time of advance payment.

- When paying a debt (debit side of accounts payable), the enterprise may choose between the book weighted average exchange rate applied to each creditor or the actual exchange rate at the time of debt payment.

Advance payments to sellers recorded to Dr 331 shall apply the actual exchange rate at the time of advance payment.

- In the cases where the enterprise applies the actual exchange rate to record the debit side of accounts payable and exchange differences that occur in the period to debit accounts, it may record them at the time transaction on a periodical basis depending on the characteristics of its operation.

- The payables that are foreign currency monetary items must be reassessed at the time of preparation of the financial statement at the closing average transfer rate of the enterprise’s regular bank.

The determination of the average transfer rate and method for handling exchange difference due to reassessment of payables that are foreign currency monetary items are specified in Article 52 of this Circular.

Article 40. Account 331 - Trade payables

1. Rules for accounting

a) This account reflects payment of the enterprise’s debts payable to sellers of supplies, goods, services, sellers of fixed assets, investment property or financial investment under concluded business contracts. This account also reflects payment of liabilities to main contractors and sub contractors. Instant payments shall not be recorded to this account.

b) Creditors of debts payables to sellers, providers or contractors shall be specified. This account must reflect advance payments to sellers, providers or contractors before goods, services or complete construction works are delivered.

c) The import trustor shall record the trade payables for imported goods to the import trustee to this account similarly to ordinary trade payables.

d) At the end of a period, if there has not been invoices of received supplies, goods or services, provisional prices may be used for bookkeeping and when invoices are available, the prices shall be adjusted and the seller shall be informed the official prices.

dd) Discounts offered by sellers that are not specified in sales invoices must be specified in these accounts.

2. Structure and contents of account 331 – Trade payables

Debit:

- Payments to sellers, suppliers or contractors;

- Advance payments to sellers, suppliers, contractors before goods, services or construction works are delivered;

- Discounts accepted by sellers under contracts;

- Discounts accepted by sellers to be deducted from debts payables to sellers;

- Value of supplies or goods in shortage or of inferior quality which are returned to sellers;

- Adjustments to difference between provisional price and official price upon availability of invoices or official quotation;

- Reassessed payables to sellers that are foreign currency monetary items (if foreign currency rate drops against the recorded exchange rate).

Credit:

- Amounts payable to sellers, suppliers or contractors;

- Adjustments to difference between provisional price and official price upon availability of invoices or official quotation;

- Reassessed payables to sellers that are foreign currency monetary items (if foreign currency rate rises against the recorded exchange rate).

Credit balance: Remaining amounts payable to sellers, suppliers or contractors.

This account may have a positive debit balance: the debit balance (if any) reflects advance payments to sellers or payment in excess of amounts payables to sellers. When preparing the financial position statement, detailed balance of each item in this account will recorded to “Assets” and “Capital”.

Article 41. Account 333 – Taxes and other payables to the State

1. Rules for accounting

1.1. This account reflects the record relation between the enterprise and the State in terms of taxes, fees, charges and other payables, payment thereof and outstanding payables to State budget in the fiscal year.

1.2. The enterprise shall calculate and declare taxes, fees, charges and other payables to State in compliance with law; record taxes payable, paid taxes, deductible taxes and refunded taxes, etc. in accounting books.

1.3. The nature of indirect taxes including VAT (including using credit-invoice method or subtraction method), special excise tax, export duty, environmental protection tax and other indirect taxes is receipts on behalf of third parties. Therefore, these indirect taxes are removed from revenues stated in the financial statement or other statements.

The enterprise may record revenues and indirect taxes payable using either of the following methods:

- Indirect taxes payable (including VAT payable using subtraction method) shall be separately recorded when revenues are recorded. With this method, the revenues included in accounting records shall not include indirect taxes payable, thus match the revenues stated in the financial statement and reflect the true nature of the transactions;

- Indirect taxes payable shall be recorded as decreases in revenues in the accounting records. With this method, indirect taxes as decreases in revenues payable shall be recorded periodically, the revenues stated in the accounting records are different from those stated in the financial statement.

In any cases, the item “Revenues” and "Revenue deductions” on the income statement shall not include indirect taxes payable.

1.4. Importers or buyers of goods or fixed assets subject to import duties, special excise tax or environmental protection tax may aggregate the taxes with historical cost of goods purchased. In the cases where an enterprise imports goods on behalf of a third party without acquiring ownership of such goods, e.g. temporary import on behalf of a third party, the import duty payable shall not be included in value of goods but as other receivables.

Resource royalty shall be included in the enterprise’s operating expenses. Land rents and real estate levies payable shall be included in administration expenses.

VAT, special excise tax, environmental protection tax on goods used internally, donated goods, sale promotion goods not generating revenues shall be included in selling expenses or administration expenses on a case-by-case basis.

1.5. Regarding taxes eligible for refund or reduction, the accountant must determine whether the tax is paid during purchase or sale as follows:

- Refunded import duty, special excise tax and environmental protection tax paid during import of goods/services shall be recorded as decreases in cost of goods sold (in case of sale) or decreases in value of inventory (in case of return of goods);

- Refunded import duty, special excise tax and environmental protection tax paid during import of fixed assets shall be recorded as decreases in other expenses (in case of sale of fixed assets) or decreases in costs of fixed assets (in case of return);

- Refunded import duty, special excise tax and environmental protection tax paid during import of goods or fixed assets without the enterprise’s acquisition of their ownership shall be recorded as other receivables.

- Refunded export duty, special excise tax and environmental protection tax paid during sale of goods or provision of services shall be recorded as other incomes.

- Refunded input VAT shall be recorded as decreases in deductible VAT. Reduction in VAT payable shall be recorded as other income.

1.6. Liabilities to state budget in export-import entrustment transactions:

- In export-import entrustment transactions (other similar transactions), the trustor shall take over liabilities to government budget;

- The trustor shall provide services including document preparation, declaration, payment to government budget (taxpayer on behalf of the trustor).

- Account 333 is only used by the trustor, not the trustee. The trustee shall record taxes payable to government budget as expenses on behalf of a third party in the account 3388 and receive the amounts paid on behalf of the trustor to account 138. The liability of the trustor for government budget shall be reflected according to:

+ When receiving notification of taxes payable, the trustee shall transfer all documents, materials or notification of taxes payable issued by the competent agency to the trustor to record the taxes payable to account 333.

+ According to payment slip to government budget of the trustee, the trustor shall record a decrease in payables to the government budget.

1.7. Each tax, fee, charge and other amounts payable, paid amounts and outstanding amounts payable shall be keep records in details.

2. Structure and contents of account 333 – Taxes and other payables to the State

Debit:

- VAT deducted in the period;

- Taxes, fees, charges and other amounts paid to the government budget;

- Tax reductions deducted from taxes payables;

- VAT on returned goods or sales rebates.

Credit:

- Output VAT and VAT payable on import goods;

- Taxes, fees, charges and other amounts payable to the government budget;

Credit balance:

Remaining taxes, fees, charges and other amounts payable to the government budget;

Debit balance (if any) of Account 333 reflects payment of taxes and amounts greater than the amounts payable to government budget, or reflects the paid taxes eligible for exemption, reduction or refund, but the refund has not been given.

Account 333 - Taxes and other payables to the State, comprises 9 sub-accounts:

- Account 3331 – VAT payable: reflecting input VAT, VAT payable on imports, deductible VAT, paid VAT and outstanding VAT payable to government budget.

Account 3331 comprises 2 sub-accounts:

+ Account 33311 – Output VAT: reflecting output VAT, deducted output VAT, VAT on sales return or sales rebates, VAT payable, paid and outstanding VAT on goods sold or services rendered in the period.

+ Account 33312 – VAT on imports: reflecting VAT payable, paid and outstanding VAT.

- Account 3332 – Special excise tax: reflecting special excise tax payable, paid and outstanding special excise tax.

- Account 3333 – Export and import duties: reflecting export and import duties payable, paid and outstanding export and import duties.

- Account 3334 – Corporate income tax: reflecting corporate income tax payable, paid and outstanding corporate income tax.

- Account 3335 – Personal income tax: reflecting personal income tax payable, paid and outstanding personal income tax.

- Account 3336 – Resource royalty: reflecting resource royalty payable, paid and outstanding resource royalty.

- Account 3337 – Real property levies and land rents: reflecting amounts payable, paid and outstanding amounts of real property levies and land rents.

- Account 3338 – Environmental protection tax and other taxes: reflecting amounts payable, paid and outstanding amount of environmental protection tax and other taxes such as license tax, withholding tax, etc.

Account 3338 comprises 2 sub-accounts:

+ Account 33381 – Environmental protection tax: reflecting environmental protection tax payable, paid and outstanding environmental protection tax;

+ Account 33382 – Other taxes: reflecting amounts payable of other taxes, paid and outstanding amounts of other taxes. The enterprise may add sub-accounts to satisfy their demands.

- Account 3339 – Fees, charges and other amounts payable: reflecting fees, charges and other amounts payable, paid and outstanding fees, charges and other amounts payable to government budget other than those reflected by accounts 3331 to 3338. This account also reflects the amounts given by the State to the enterprise as assistance (if any) such as subsidies.

Article 42. Account 334 – Payables to employees

1. Rules for accounting

This account reflects payables to the enterprise’s employees including salaries, wages, bonuses, social insurance and other payables included in employees’ incomes and payments thereof.

2. Structure and contents of account 334 – Payables to employees

Debit:

- Salaries, wages and bonuses, social insurance and other items which are paid or advanced to employees;

- Amounts deducted from salaries or wages of employees.

Credit: Salaries, wages and bonuses, social insurance and other amounts payable to employees;

Credit balance: Outstanding salaries, wages and bonuses, social insurance and other amounts payable to employees.

Account 334 may have debit balance. Debit balance of account 334 (if any) reflects negative difference between paid amounts and salaries, wages or other amounts payable to employees.

Article 43. Account 335 – Accrued expenses

1. Rules for accounting

a) This account reflects payments for goods or services received from the seller in the period that have not been made due to lack of invoices or accounting documents and are recorded as operating expenses of the period.

This account also reflects amounts payable to employees during a period, such as annual leave salary and operating expenses recorded as accrued expenses in the period, such as:

- Expenses incurred during seasonal cessation of production which is planned by the enterprise. Accountants shall estimate and include the expenses incurred during such cessation period in operating expenses of the period.

- Estimated loan interests payable.

b) It is required to differentiate accrued expenses from provisions recorded to the account 352 and reflect them in the financial statement. To be specific:

- Provisions are current liabilities without specific payment schedule; accrued expenses are current liabilities with specific payment schedule;

- Provisions are usually uncertain payables (i.e. provisions for product warranty or construction warranty); accrued expenses must be certain payables.

- In the financial statement, provisions are separated from trade payables and other payables but accrued expenses are part of trade payables or other payables.

- Accrued expenses shall be included in operating expense of the period according to matching principle. The payables not incurred because the goods or services are not received and are included in operating expenses of the period in advance to avoid fluctuation in the operating expenses shall be recorded as provisions.

c) The accrued amounts recorded as provisions instead of to account 335 include:

- Cost of periodic major repairs of specific tangible fixed assets which may be recorded as accrued expense in the reporting year or several years later;

- Provisions for product warranty or construction warranty;

- Other provisions (refer to account 352).

d) In principle, accrued expenses must be offset against actual expenses incurred. The difference between accrued expenses and actual expenses must be reversed.

dd) Some cases in which loan interest is capitalized:

- Interest of loans for construction of fixed assets or investment property shall be capitalized even if the construction duration is under 12 months;

- The contract may not capitalize loan interest to serve the construction of building works or assets for their clients, including separate loans, for example: a contractor takes a loan to execute a construction; a shipbuilder builds a ship under a contract with its owner, etc.

2. Structure and contents of account 335 – Accrued expenses

Debit:

- Actual expenses that have been recorded as to accrued expenses;

- Positive difference between accrued expenses and actual expenses recorded as decreases in expenses.

Credit: Accrued expenses recorded to operating expenses.

Credit balance: Accrued expenses recorded to operating expenses but have not incurred in reality.

Article 44. Account 336 – Intra-company payables

1. Rules for accounting

a) This account reflects settlement of payables between the enterprise (superior unit) and affiliated units and among affiliated units of the same company.

In the enterprise, the classification of inferior units for accounting purposes shall be based upon their nature (independent accounting or dependent accounting, whether or not having legal status or having legal representative) instead of their he names (members, branches, plants, groups, etc).

b) Intra-company payables recorded to account 336 “Intra-company payables” include working capital payables and other payables which the affiliated unit pays to the enterprise or other affiliated units; amounts which the enterprise grants to affiliated unit. Amounts payable may relate to receipt of asset, capital, funds, current payment, payment on behalf of third parties, etc.;

c) According to the enterprise's organizational structure and operating nature, the enterprise shall decide whether its affiliated units record working capital granted by the enterprise to account 3361 – Working capital provided for affiliated units or account 411 – Owner's invested equity.

d) Account 336 “Intra-company payables” is recorded in details for every unit which has mutual payment relationship, and accounts payable will be observed in details.

dd) At end of the period, accountants shall check and collate Account 136 and Account 336 between units according to every internal payment content, to prepare offsetting reports for every units, as basis for offsetting adjustment in these two accounts. If difference is found while collating, cause of such difference must be identified to make adjustments.

2. Structure and contents of account 336 – Intra–company payables

Debit:

- Payments to affiliated units;

- Payments to the enterprise by affiliated units;

- Amounts paid for items which internal units pay or receive on behalf of other internal units;

- Offsetting receivables against payables of the same unit having payment relationships.

Credit:

- Working capital granted to affiliated units by the enterprise;

- Amounts payable to the enterprise by affiliated units;

- Amounts payable to affiliated units;

- Amounts payable for other internal units on items paid or received on behalf of other units.

Credit balance: Outstanding amounts payable to the enterprise and internal units in the enterprise.

Account 336 – Intra-company payables, comprising 2 sub-accounts:

- Account 3361 – Working capital provided for affiliated units: This account is only opened by affiliated units having no legal status to record working capital granted by the enterprise.

- Account 3368 – Other intra-company payables: reflecting other payables between internal units in the same enterprise.

Article 45. Account 338 – Other payables

1. Rules for accounting

a) This account reflects settlement of payables other than those reflected by other accounts (from account 331 to account 336) This account also reflects unearned revenues from services provided for customers.

b) Structure and contents of account 338:

- Value of assets in surplus without identify causes pending resolution by competent authorities; Value of assets in surplus to be returned to internal and external owners (individuals or groups) under decisions of competent authorities agency written if the cause of which has been identified.

- Appropriated amount and payment of social insurance, health insurance, unemployment insurance premiums and trade union fees;

- Amounts deducted from salaries of employees according to court decisions;

- Profits and dividends payable to owners;

- Temporary loans or borrowings of supplies, goods or capital contributed to BCC without establishment of a new legal entity;

- Amounts collected on behalf of third parties pending return, amounts received from the trustor to pay import duty, export duty or VAT on imports and pay on behalf of the trustor;

- Advance payment for lease of property, infrastructure for multiple accounting periods, loan interest received before loan is granted or debt instruments are purchased (unearned revenue); unearned revenues and incomes

- The difference between instalment price and asked price (instalment interest).

- Deposits paid by other entities.

- Other payables such as payment for voluntary pension insurance, life insurance and other allowances (other salaries) for employees, etc.

c) The accountant responsible for receipt of deposits shall classify them by payers, term and currency (if any). Deposits to be paid within 12 months shall be recorded as short-term debts; Deposits to be paid after 12 months shall be recorded as long-term debts.

2. Structure and contents of account 338 – Other payables

Debit:

- Distribution of value of assets in surplus among relevant accounts according to decision written in resolution report;

- Trade union fees spent;

- Paid social insurance, health insurance, unemployment insurance premiums and trade union fees

- Unearned revenues of each accounting period; advance payment returned to clients in case of termination of lease;

- Instalment interest recorded as financial expense;

- Returned deposits;

- Other paid and returned amounts;

- Reassessed payables that are foreign currency monetary items (if foreign currency rate drops against the recorded exchange rate).

Credit:

- Value of assets in surplus pending resolution (without identified cause); Value of assets in surplus returned to their owners according to the decision written in resolution report because of unidentified cause;

- Social Insurance, health Insurance, unemployment insurance and trade union fees included in operating expenses or deducted from salaries of employees;

- Payment for employees' house rents, electricity and water supply;

- Social insurance payout given by social insurance agencies to employees;

- Unearned revenues in the period;

- Instalment interest;

- Temporary loans or borrowings of supplies, goods or capital contributed to BCC without establishment of a new legal entity;

- Return of receipts on behalf of other units;

- Received deposits in the period;

- Other payables;

- Reassessed payables that are foreign currency monetary items (if foreign currency rate rises against the recorded exchange rate).

Credit balance:

- Accrued social insurance, health insurance premiums and trade union fees which have not been paid or unspent trade union fees;

- Value of assets in surplus pending resolution;

- Closing unearned revenues;

- Other payables;

- Unreturned deposits.

This account may have debit balance, which reflects the positive difference between paid amounts and amounts payable, social insurance payout that has not been given employees and overspent trade union fees that have not been replenished.

Account 338 – Other payables, comprising 8 sub-accounts:

- Account 3381 – Assets in surplus pending resolution: reflecting value of assets in surplus without identified cause pending resolution by competent authorities. In case the cause of surplus is identified, the assets in surplus shall be recorded to relevant accounts, not to account 338 (3381).

- Account 3382 – Trade union fees: reflecting accruement and payment of trade union fees by units.

- Account 3383 – Social insurance: reflecting accruement and payment of social insurance at units.

- Account 3384 – Health insurance: reflecting accruement and payment of health insurance by units.

- Account 3385 – Unemployment insurance: reflecting accruement and payment of unemployment insurance by units.

- Account 3386 – Received deposits: reflecting deposits received from external entities.

- Account 3387 – Unearned revenues: reflecting unearned revenues of the enterprise in the period, increases and decreases thereof. Unearned revenues include: advance payments of customers for one or multiple accounting periods for asset lease; interests received in advance when lending; other unearned revenues such as installment interest; revenues corresponding to the value of goods. The following amounts shall be not recorded to this account:

+ Advance payments by buyers before goods or services are provided by the enterprise;

+ Unearned revenue from asset lease or service provision for multiple periods (unearned revenue is only recorded when the revenue is actually collected, not recorded corresponding to TK 131 – Trade receivables).

- Account 338 – Other payables: records other payables of the unit other than payables recorded to accounts from 3381 to 3387.

Article 46. Account 341 – Borrowings and finance lease liabilities

1. Rules for accounting

a) This account reflects the enterprise’s loans (including loans in the form of bonds), finance lease liabilities and repayment thereof.

b) Terms of borrowings and finance lease liabilities shall be specified. Loans or finance lease liabilities to be paid after 12 month from the day on which the financial statement is prepared shall be recorded as long-term borrowings or finance lease liabilities. Loans or finance lease liabilities to be paid within 12 month from the day on which the financial statement is prepared shall be recorded as short-term borrowings or finance lease liabilities.

c) Three cases of loans in the form of bond issuance:

- Issuance of parity bonds, which are bonds issued at their face value.

- Issuance of discounted bonds, which are bonds issued at a price lower than their face value. The difference between the price and face value of the bonds is the discount. In this case, the market interest rate is usually higher than the nominal interest rate of the bonds issued.

- Issuance of premium bonds (trading above their par value). The difference between the price and par value of the bond is the premium. In this case, the market interest rate is usually smaller than the nominal interest rate of the bonds issued.

The enterprise shall record the discount or premium at the time of bond issuance and specify:

+ Face value of bonds;

+ Bond discount;

+ Bound premium.

- The enterprise shall monitor discount and premium of each type of bond and distribution thereof when determining borrowing costs, which is included in financial expense or capitalized as the case may be. To be specific:

+ Bond discount shall be gradually distributed to borrowing costs of each period throughout the bond term;

+ Bond premium shall be gradually offset against borrowing costs of each period throughout the bond term;

+ If the conditions for capitalization of interest expense are satisfied, the loan or distributed discount or premium capitalized in a period must not exceed the actual loan interest and the amount of discount or premium distributed in the period;

+ Discount or premium shall be distributed throughout the bond term in a linear fashion.

- In case of interest payment upon bond maturity, the enterprise shall calculate the bond interest to be paid in each period and aggregate it with financial expense or capitalize it as work in progress.

- When a financial position statement is prepared, the bond value shall equal face value minus (-) discount plus (+) premium and recorded as a liability.

d) Direct borrowing costs (other than interest) such as appraisal, auditing, document compilation, bond issuance expenses shall be included in financial expense. Expenses derived from separate loans serving investment, construction or production of unfinished products may be capitalized.

dd) Regarding a finance lease liability, the total debt, which equals (=) current value of the minimum rent or fair value of the assets for rent, shall be recorded to Cr 341.

2. Structure and contents of account 341 – Borrowings and finance lease liabilities

Debit:

- Principal of borrowings and finance lease liabilities that have been paid;

- Reduction in principal accepted by creditors;

- Distributed bond premium;

- Closing exchange difference due to reassessment of principals that are foreign currency monetary items (if foreign currency rate drops against the recorded exchange rate).

Credit:

- Borrowings and finance lease liabilities incurred in the period;

- Distributed bond discount;

- Closing exchange difference due to reassessment of principals that are foreign currency monetary items (if foreign currency rate rises against the recorded exchange rate).

Credit balance: Premature principal.

Account 341 consists of 2 sub-accounts

Account 3411 – Loans: reflecting values of loans and repayment thereof (including those in the form of bond issuance), distribution of bond discount and premium.

Account 3412 – Finance lease liabilities: reflecting values of the enterprise’s finance lease liabilities and payment thereof.

Article 47. Account 352 – Provisions for payables

1. Rules for accounting

a) This account reflects the enterprise’s current provisions for payables, creation and use thereof.

b) Provision for payables shall be recorded when the following conditions are satisfied:

- The enterprise’s liability (legal liability or joint liability) is the result of a previous event;

- Possible decline in economic benefits that leads to fulfillment of the liability;

- The value of the liability can be reliably estimated.

c) The recorded value of a provision for payables is the most reasonable amount that will be spent to fulfill the liability at the end of the accounting period.

d) Provision for payables shall be created upon preparation of the financial statement. If the provision for payables in one accounting period is greater than the remaining provision in the previous period, the difference shall be recorded as operating expenses of the former. If the provision for payables in one accounting period is smaller than the remaining provision in the previous period used, the difference shall be reversed.

Provision for construction warranty shall be created separately for each construction work at the end of the accounting period.

dd) Only the expenses related to the provision may be covered by such provision.

e) Do not create provision for future loss on operation unless it is related to a high-risk contract and is qualified as provision. If the enterprise enters into a high-risk contract, the current liability under the contract shall be recorded and assessed as a provision and each of such contract shall have a separate provision.

g) Provisions for payables include:

- Provisions for product warranty;

- Provisions for construction warranty;

- Provision for other payables, including provision for severance pay, periodic repair and maintenance of fixed assets, provision for payables under high-risks contracts where the payables exceed economics benefits from such contracts;

h) Provision for product warranty shall be recorded as selling expense; provision for construction warranty shall be recorded as work in progress; provision for other payables shall be recorded as relevant expenses.

i) If the provision for construction warranty is greater than actual expense, the difference shall be reversed to Account 711 “Other income”. Reversed provision for product warranty shall be recorded as a decrease in selling expense. Reversed provision for other payables shall be recorded as decreases in relevant expenses.

k) When the enterprise is partially or fully reimbursed by a third party for a provision, such reimbursement shall be recorded as other income.

2. Structure and contents of account 352 – Provisions for payables

Debit:

- Decreases in provisions for payables when relevant expenses are incurred;

- Decreases in provisions for payables (reversal) when the enterprise is certain that no liability is incurred.

- Decrease in provisions for payables, which is the negative difference between provision for payables of current year and remaining provision of the previous year.

Credit: Provision for payables included in expense.

Credit balance: Closing provision for payables

Account 352 comprises 3 sub-accounts:

- Account 3521 – Provision for product warranty: reflecting provision for warranty on products sold in the period;

- Account 3522 – Provision for construction warranty: reflecting provision for warranty on construction works and work items completed and transferred in the period;

- Account 3524 – Provision for other payables: reflecting provision for other payables other than those mentioned above, such as: provision for severance pay, periodic repair and maintenance of fixed assets, etc.

Article 48. Account 353 - Welfare fund

1. Rules for accounting

a) This account reflects the enterprise’s welfare fund, increases and decreases thereof. The welfare fund is part of the enterprise’s after-tax profit and intended to give rewards, improve the welfare of employees.

b) Development and use of the welfare fund shall comply with the enterprise’s financial regulations or the owner’s decision.

c) Each type of welfare fund shall be accounted for separately.

d) Regarding a fixed asset funded by the welfare fund and then used for the enterprise’s business operation, it shall be recorded as an increase in paid-in capital and a decrease welfare fund.

dd) Regarding a fixed asset funded by the welfare fund and then used for the enterprise’s welfare, it shall be recorded as an increase in fixed assets and transfer it from Account 3532 to Account 3533. Depreciation of such fixed assets shall be recorded annually instead of monthly and recorded as decrease in Account 3533.

2. Structure and contents of account 353 – Welfare fund

Debit:

- Spending of the welfare fund;

- Decrease in welfare fund used for creation of fixed assets upon depreciation of fixed assets or loss discovered during stocktaking of fixed assets;

- Purchase of fixed assets funded by welfare fund and used for welfare purposes;

- Withdrawals from the welfare fund to inferiors.

Credit:

- Contributions to the welfare fund from the enterprise’s after-tax profit;

- Contributions to the welfare fund from senior officers;

- Increase in welfare fund used for creation of fixed assets funded by the welfare fund and used for the enterprise’s business operation or welfare purposes.

Credit balance: Remaining welfare fund.

Account 353 - Welfare fund consists of 4 sub-accounts:

- Account 3531 – Reward fund: balance, contribution to and withdrawals from the enterprise’s reward fund.

- Account 3532 – Welfare fund: Balance, contribution to and withdrawals from the enterprise’s welfare fund.

- Account 3533 – Welfare fund for creation of fixed assets: balance, increases and decreases of the fund.

- Account 3534 – Manager reward fund: balance, increases and decreases of the fund.

Article 49. Account 356 – Scientific and technological development fund

1. Rules for accounting

a) This account reflects the balance, increases and decreases in the enterprise’s development of science and technology fund. An enterprise’s development of science and technology fund may only be used for investment in science and technology in Vietnam.

b) Development of science and technology fund shall be included in administration expenses. Contributions to and use of the enterprise’s development of science and technology fund shall comply with regulations of law.

c) In the cases where the enterprise uses the development of science and technology fund to sponsor experimental production, the proceeds from sale of experimental products shall be offset against the experimental production expense as follows:

- If the proceeds are greater than the production expense, the difference shall be recorded as an increase in the development of science and technology fund;

- If the proceeds are smaller than the production expense, the difference shall be recorded as a decrease in the development of science and technology fund;

d) The enterprise shall periodically send competent authorities reports on contributions to and use of the development of science and technology fund.

2. Structure and contents of account 356 – Development of science and technology fund

Debit:

- Withdrawals from the scientific and technological development fund;

- Expenditure of the development of science and technology fund on creation of fixed assets; remaining value of fixed assets upon their liquidation; cost of liquidation of fixed assets derived from the development of science and technology funds;

- Expenditure of the development of science and technology fund on creation of fixed assets when they are used for the enterprise’s business operation.

Credit:

- Contributions to the scientific and technological development fund;

- Proceeds from sale or liquidation of fixed assets derived from the development of science and technology fund.

Credit balance: Remaining fund of the science and technology development fund.

Account 356 – Scientific and technological development fund consists of 2 sub-accounts:

- Account 3561 – Development of science and technology fund: Balance, contributions to and withdrawals from the development of science and technology fund;

- Account 3562 – Development of science and technology fund for creation of fixed assets: Balance, contributions to and withdrawals from the development of science and technology fund for creation of fixed assets;

Article 50. Rules for accounting of equity

1. The equity is the enterprise’s remaining net asset owned by shareholders or capital contributors (owners). Sources of equity:

- Capital contributed by owners;

- Profit from business operation;

- Other amounts recorded as increases in equity.

2. Contribution of charter capital shall not be recorded. Always record the capital contributed by owners in reality instead of promised capital. In case of contribution of non-monetary assets as capital, their fair values on the contribution date shall be recorded.

3. The receipt of capital contribution in the form of intangible assets such as copyrights, right to use property or trademark, etc. is subject to permission by law or by a competent authority. Contribution of trade mark or brand name, if not regulated by law, shall be accounted for as if lease of assets or franchise, in which case:

- The contributor shall record the proceeds from the transaction as revenue from lease of intangible assets or franchise; do not record them as increases in investment in other entities and income or equity;

- The investee shall record the value of the trademark or brand name as an increase in equity. Payment for the use of the trademark or brand name shall be recorded as payment for lease of assets or franchise expense.

4. Profit shall be distributed when the enterprise has undistributed after-tax profit. Any payment of dividends or profits to owners in excess to the undistributed after-tax profits is considered a decrease in capital contribution, in which case the enterprise has to follow procedures for adjusting its Certificate of Business registration.

Article 51. Account 411 – Paid-in capital

1. Rules for accounting

a) This account is used to record current paid-in capital increases and decreases thereof.

b) Paid-in capital includes:

- Initial capital contribution and additional capital contributions;

- Share premium;

- Other capital.

c) Only record capital contributed by owners in reality to Account 4111 – “Capital contributed by owners”; do not record the promised amounts or receivables from owners.

d) An enterprise shall record paid-in capital according to their sources (contribution by owners, share premium, other capital) and contributors.

dd) A decrease in paid-in capital shall be recorded when:

- Capital is returned to owners or treasury shares are retired as prescribed by law;

- The enterprise is dissolved or shut down as prescribed by law;

- Other cases prescribed by law.

e) Determination of capital contribution in foreign currency

- When the investment license stipulates the enterprise’s charter capital in foreign currency, the adequacy of capital in foreign currency contributed by investors shall be determined according to the amount in foreign currency contributed in reality regardless of conversion into VND according to the investment license.

- Where the enterprise’s accounting books and financial statements are expressed in the accounting currency but an investor contributes capital in foreign currency, the actual exchange rate on the contribution date shall be applied to convert the contributed capital into the accounting currency and it will be recorded as paid-in capital or share premium (if any).

- Do not reassess credit balance of Account 411 paid-in capital derived from foreign currency.

g) In case of capital contribution in the form of assets, an increase in paid-in capital at the reassessed price of the assets accepted by the parties shall be recorded.

h) Regarding a joint-stock company, capital contribution in the form of shares shall be recorded at the share price in reality and recorded as paid-in capital and share premium as follows:

- Paid-in capital shall be recorded at the face value of shares;

- Share premium reflects the difference between the face value and share price (including reissuance of treasury shares) and may be a positive value (if the share price is higher than face value) or negative value (if the share price is lower than face value).

2. Structure and contents of account 411 – Paid-in capital

Credit: Decreases in paid-in capital due to:

- Return of contributed capital to owners;

- Issuance of shares at lower price than face value;

- Dissolution or shutdown of the enterprise;

- Loss offsetting under a decision of a competent authority;

- Retirement of treasury shares (of a joint-stock company)

Credit: Increases in paid-in capital due to:

- Capital contribution by owners;

- Addition of capital from profit or funds from equity;

- Issuance of shares at higher price than face value;

- Inclusion of donations (exclusive of taxes) in paid-in capital under a decision of a competent authority.

Credit balance: Current paid-in capital.

Account 411 – Paid-in capital, comprising 3 sub-accounts:

- Account 4111 – Capital contribution by owners: reflecting contributed capital by owners in reality according to the company’s charter. Regarding a joint-stock company, capital contribution in the form of shares shall be recorded to this account at their face value. Account 4111 may include voting common shares and preference shares.

- 4112 - Share premium: reflecting the difference between the share price and face value; difference between buying price for treasury shares and prices for reissued treasury shares. This account may have a credit balance or debit balance.

- Account 4118 – Other capital: reflecting capital derived from profit or donations or reassessment of assets (if recorded as increases or decreases in paid-in capital).

Article 52. Account 413 – Exchange difference

1. Exchange rates and exchange differences

1.1. Exchange difference means a difference occurs in the exchange of foreign currency and the accounting period at different exchange rates. An exchange rate usually occurs when:

- Transactions in foreign currency are made in the period;

- Foreign currency monetary items are reassessed while preparing the financial statement;

- A financial statement in foreign currency is converted into VND.

1.2. Exchange rates used in accounting

An enterprise making transactions in foreign currency shall record them in accounting books and the financial statement in VND or the accounting currency. The conversion of the foreign currency into the accounting currency shall be based upon:

- The actual exchange rate;

- The recorded exchange rate.

After tax liability is determined, the enterprise shall implement regulations of law on taxation.

1.3. Determination of recorded exchange rate:

The recorded exchange rate includes specific exchange rates and weighted average exchange rates (after each entry or at the end of the period).

- The specific exchange rate is the exchange rate related to a transaction at a specific time. The specific exchange rate shall be used in the accounting books to record advance payments in foreign currency received from customers to the debit side of accounts receivable or record advance payment in foreign currency to sellers to the credit side of accounts payable.

- Weighted average exchange rate equals (=) the total value of every foreign currency monetary items (in accounting currency) divided by (:) the amount of foreign currencies at that time.

1.4. Determination of exchange difference and handling thereof:

1.4.1. Regarding transactions in foreign currencies in the period:

a) The enterprise shall convert them to accounting currency at actual exchange rates as follows:

- Actual exchange rate when buying or selling a foreign currency (under a spot contract, forward contract, futures contract, option contract or swap contract) is the agreed exchange rate in the foreign currency exchange contract between the enterprise and the commercial bank;

- If the contract does not specify the exchange rate, the enterprise may apply the approximate average transfer rate of the enterprise’s regular bank.

The approximate exchange rate must ensure that the deviation does not exceed 1% of the average transfer rate of the enterprise’s regular bank. The average transfer rate may be determined on a daily, weekly or monthly basis according to the arithmetic mean of the daily buying rates and selling rates of the commercial bank.

The enterprise may apply the approximate exchange rate to:

+ Credit side of cash accounts; debit side of accounts receivable (except for advance payments in foreign currency from customers, in which case the specific exchange rate shall be applied to the debit side of Account 131), debit side of accounts payable when advancing payments to sellers.

+ Credit side of accounts payable (except for advance payments in foreign currency to sellers, in which case the specific exchange rate shall be applied to Cr 331), Credit side of accounts receivable when receiving advance payments from customers.

+ Assets classified as equity;

+ Other revenue and income accounts.

When advance payment is made by the buyer, it shall be recorded at the actual exchange rate at the time of advance payment. The revenue and income from the remaining amount shall be recorded at the actual exchange rate at the time of payment.

+ Accounts reflecting operating expenses and other expenses.

In the cases where the advance payment is included in operating expense in the period, it will be recorded at the actual exchange rate at the time of advance payment instead of the exchange rate at the time of inclusion).

+ Accounts reflecting assets.

In the cases where the advance payment is given to the seller, the value of asset equal to the advance payment shall be recorded at the actual exchange rate at the time of advance payment, the value of asset equal to the remaining amount shall be recorded at the actual exchange rate at the time of recording.

If actual exchange rate is the approximate exchange rate, the enterprise must ensure that it does not significantly affect its finance and performance in the accounting period.

b) The enterprise may apply recorded exchange rate to convert the foreign currency into accounting currency in the following cases:

- The weighted average exchange rates shall be applied to the credit side of cash accounts and credit side of accounts receivable (other than advance payments from buyers), and debit side of accounts payable (other than advance payment to sellers).

+ In addition to weighted average exchange rates, enterprises may apply actual exchange rates to the credit side of cash accounts, credit side of accounts receivable and debit side of accounts payable.

Exchange differences that occur in the period shall be recorded upon their occurrence or on the periodical basis to financial income or financial expense depending on the enterprise’s operation and requirements.

+ In the cases where the enterprise applies the actual exchange rate to the credit side of cash accounts, credit side of accounts receivable and debit side of accounts payable in foreign currency, if at the end of the accounting period:

(+) the foreign currency monetary items are empty, the enterprise must include the exchange differences that occur in the period as financial income or financial expense of the period.

(+) the foreign currency monetary items are not empty, the enterprise shall carry out reassessment at the recorded weighted average exchange rates and all exchange differences caused by reassessment of foreign currency monetary items shall be dealt with in accordance with 1.4.2 of this Article.

- Specific exchange rates shall be applied to:

+ The debit side of accounts receivable when receiving full payments from buyers upon delivery of products, fixed assets or services;

+ The credit side of accounts payable when making full payments to sellers upon delivery of products, fixed assets or services.

1.4.2. The closing average transfer rate of the enterprise’s regular bank shall be applied to reassessment of foreign currency monetary items.

Exchange differences because of reassessment of foreign currency monetary items (after being offset against the debit and credit sides of Account 413) shall be recorded as financial expense (in case of loss) or financial income (in case of profit).

1.4.3. Settlement of exchange differences before inauguration:

- Remaining loss on exchange differences incurred before inauguration (reflected by Account 242 before the effective date of this Circular) must be included in financial expense.

- Remaining profit on exchange differences before inauguration (reflected by Account 3387 before the effective date of this Circular) must be included in financial income.

1.5. Foreign currency monetary items are recovered assets in foreign currencies or debts in foreign currencies. Foreign currency monetary items may include:

a) Cash, cash equivalents, term deposits in foreign currencies;

b) Debts receivable and payable of foreign currency origins, except:

- Advance payments to buyers and prepaid fees in foreign currencies. While preparing the financial statement, if it is evident at the seller is not able to provide goods/services and the enterprise will have the advance payment in foreign currency returned, it will be considered an account derived from foreign currencies.

- Advance payments by buyers and prepaid fees received in foreign currencies. While preparing the financial statement, if it is evident at the enterprise is not able to provide goods/services and will have to return the advance payment, it will be considered an account derived from foreign currencies.

c) Loans taken or granted in any shape or form that may be repaid in foreign currencies.

d) Paid deposits that may be returned in foreign currencies;

dd) Received deposits that have to be returned in foreign currencies.

2. Rules for accounting of exchange differences

a) The enterprise shall monitor foreign currencies separately in the form of cash, bank deposit, receivables, payables and capital contributed by owners.

b) All exchange differences that occur in the period must be promptly recorded as financial (in case of profits) or financial expenses (in case of losses) of the accounting period.

c) Foreign currency monetary items must be reassessed at the closing average transfer rate of the enterprise’s regular bank whenever a financial statement is prepared.

d) Exchange differences must not be aggregated with value of construction work-in-progress.

3. Structure and contents of account 413 – Exchange differences

Debit:

- Loss on exchange rate due to reassessment of foreign currency monetary items;

- Profit on exchange rate included in financial income.

Credit:

- Profit on exchange rate due to reassessment of foreign currency monetary items;

- Loss on exchange rate included in financial expense.

Account 413 does not have a balance.

Article 53. Account 418 – Other funds

1. Rules for accounting

This account reflects the current value of other funds, increases and decreases thereof. The funds are derived from profit exclusive of corporate income tax. The spending of other funds shall comply with each enterprise’s regulations or the owner’s decision.

2. Structure and contents of account 418 – Other funds

Debit: Spending of other funds.

Credit: Increase in other funds derived from after-tax profit.

Credit balance: Current balance of other funds.

Article 54. Account 419 – Treasury shares

1. Rules for accounting

a) This account reflects current value, increases and decreases in the quantity of shares publicly issued and then repurchased by the issuer.

Treasury shares held by the company do not pay dividends, have no voting rights and will not be included in asset division upon the company’s dissolution. When dividends are distributed, treasury shares held by the company shall be considered unsold shares.

b) The value of treasury shares shall be recorded to this account at actual buying prices, inclusive of directly attributable costs such as transaction expenses, information expense, etc.

c) At the accounting period, when the financial statement is prepared, the actual value of treasury shares shall be recorded as a decrease in paid-in capital on the financial position statement in the form of a negative number (…).

d) This account does not reflect the value of shares purchased by the company from other joint-stock companies for investment purposes.

dd) The cost of treasuring shares when being reissued or given as dividends or rewards shall be calculated according to the weighted average method.

e) In the cases where the enterprise repurchase the shares its issued for destruction upon obtainment, their value shall be recorded as a decrease in capital contributed by owners and share premium (see instructions in Account 411 - Paid-in capital) instead of to this account.

2. Structure and contents of account 419 – Treasury shares

Debit: Actual value of treasury shares upon purchase.

Credit: Actual value of treasury shares upon issuance, dividend payment or cancellation.

Debit balance: Actual value of treasury shares held by the enterprise.

Article 55. Account 421 - Undistributed after-tax profit

1. Rules for accounting

a) This account reflects the business outcome after corporate income tax is paid, division of profit or loss of the enterprise.

b) Profit of the enterprise must be divided in a transparent way and conformably with applicable finance policies.

c) The business outcome of each fiscal year (previous year and current year), use of the enterprise’s profit (contribution to funds, addition to paid-in capital, distribution of dividends or profit to shareholders and investors) must be specified.

d) In the case of retrospective application of accounting policies and retroactive adjustment of crucial errors of previous years that are discovered in the current year that lead to adjustments to opening undistributed profit, the opening balance of Account 4211 shall be increased or decreased on the accounting books and “undistributed after-tax profits” on the financial position statement shall be increased or decreased accordingly.

Every enterprise when distributing profit should consider non-monetary items in undistributed after-tax profits that might affect their cash flow and ability to pay dividends/profit, such as:

- Profit due to reassessment of assets contributed as capital; reassessment of foreign currency monetary items; reassessment of financial instruments;

- Other non-monetary items, etc.

e) In a business cooperation contract (BCC) that distributes after-tax profit, the enterprise shall monitor its outcome as the basis for distribution of profit or loss among the parties. The enterprise that declare and pay corporate income tax on behalf of other parties under a BCC shall only reflect the profit it receives and must not reflect the outcome of the entire BBC in this account, unless it has control over the BCC.

g) For preferred dividends payable:

- If the preferred shares are classified as liabilities, the dividends derived from undistributed after-tax profits shall not be recorded;

- If the preferred shares are classified as equity, the preferred dividends payable shall be accounted for similarly to dividends of common shares.

h) The enterprise shall monitor the deductible loss and non-deductible loss in its internal administration system, where:

- Deductible loss is a loss caused by deductible expenses;

- Non-deductible loss is a loss caused by non-deductible expenses.

When loss is carriedforward, the enterprise may deduct the deductible loss from tax payable in the future.

2. Structure and contents of account 421 – Undistributed after-tax profits

Debit:

- Loss on the enterprise’s business operation;

- Contributions to the enterprise’s funds;

- Distributed dividends and profits among owners;

- Additional equity.

Credit:

- Actual profit on the enterprise’s business operation in the period;

- Loss covered by superior units;

- Offset loss on the enterprise’s operating activities.

This account may have a credit balance or debit balance.

Debit balance: Unsettled loss on business operation.

Credit balance: Undistributed or unused after-tax profit.

Account 421 comprises 2 sub-accounts:

- Account 4211 – Previous years’ after-tax profit: reflecting the previous years’ performance, distribution of profit or loss. Account 4211 also reflects increases and decreases in opening balance of Account 4211 because of retrospective adjustment due to changes in accounting policies and retrospective adjustment of previous years’ crucial errors discovered in the current year.

In the beginning of the succeeding year, the opening balance shall be transferred from Account 4212 “Current year’s undistributed after-tax profits” to Account 4211 “Previous years’ undistributed after-tax profits”.

- Account 4212 – Current year’s after-tax profit: reflecting the current year’s distribution of profit or loss.

Article 56. Rules for revenue accounting

1. Revenue is economic benefits that increase the enterprise’s equity, except additional capital contributed by shareholders. Revenue recorded at the time of transaction where economic benefit is certain shall be determined at the fair values of the amounts receivable, whether the payment has been collected or not.

2. The revenue and cost of creation of such revenue shall be simultaneously recorded according to matching principle. In certain cases where conservatism principle conflicts with matching principle, accountants shall record the revenue according to the nature of the transaction.

- A business contract may comprise multiple transactions. Accountants must identify them to apply appropriate conditions for recording revenue.

- Revenue must be recorded according to nature rather than appearance or name of the transaction and distributed according to the obligation to provide goods/services.

+ Example: A customer only receives promotional products when buying products (e.g. buy two get one free). The nature of this transaction is discount. The complimentary product given to the customer is actually a sale in nature because the customer will not receive it without buying any product. In this case, the value of the complimentary product will be recorded as cost and revenue corresponding to its fair value must be recorded.

- Regarding a transaction in which the seller has obligations in the present and in the future, the revenue shall be distributed according to fair value of each obligation and recorded when such obligations are fulfilled.

3. Revenue, profit or loss is not considered realized if an enterprise’s future obligation (except warranty) is not fulfilled and economic benefit is not certain; the classification of profits and loss as realized and unrealized depend on the existence of the cash flow.

A profit or loss on reassessment of assets or liabilities will be considered unrealized because at the time of reassessment, the enterprise already has the assets and incur the liabilities. Example: Profits or losses on reassessment of assets contributed as capital in other entities or reassessment of primary assets according to fair values are considered realized.

4. Revenue does not include amounts collected on behalf of third parties, such as:

- Indirect tax (VAT, export duty, special excise tax, environmental protection tax);

- Amounts collected by sellers on behalf of goods owners under an agent contract;

- Surcharges in addition to selling prices not retained by the seller;

- Other cases.

In the cases where indirect taxes cannot be separately identified at the time of transaction, revenue on the accounting books may include indirect taxes but they must be recorded as decreases in revenue. However when the financial statement is prepared, indirect taxes must be identified and removed from the revenue.

5. The time and basis for recording revenues may be different on a case-by-case basis. Assessable revenue shall only be used to determine taxes payable prescribed by law; revenue on the accounting books serving preparation of the financial statement shall follow accounting rules and is not necessarily equal to that on sale invoices.

6. Recorded revenue only comprises revenues in the accounting period. Revenue accounts do not have balance. Revenue shall be carriedforward at the end of each accounting period to determine business performance.

Article 57. Account 511 – Revenue from goods sale and service provision

1. Accounting rules

1.1. This account reflects revenues from:

a) Sale of goods produced or purchased by the enterprise; sale of investment real property;

b) Provision of services: performance of agreed tasks under contracts in one or several accounting periods such as transport, tourism services, operating lease, revenue from construction contracts, etc.

c) Other revenues.

1.2. Conditions for recording revenues

a) An enterprise shall record an amount as revenue from goods sale when all of the following conditions are satisfied:

- Most risk and benefits associated with the ownership of the product have been transferred from the enterprise to the buyer;

 - The enterprise no longer holds control over the product as its owner or controller;

- The revenue can be reliably determined. If the contract allows the buyer to return the products under certain conditions, the enterprise will only record the revenue if such conditions are nonexistent and the buyer is not allowed to return the products (except exchange of product/service);

- The enterprise has obtained or will obtain economic benefits from the sale;

- Selling expenses are identified.

b) An enterprise shall record an amount as revenue from service provision when all of the following conditions are satisfied:

- The revenue can be reliably determined. If the contract allows the buyer to return the service under certain conditions, the enterprise will only record the revenue if such conditions are nonexistent and the buyer is not allowed to return the service rendered;

- The enterprise has obtained or will obtain economic benefits from the provision of such service;

- Completed portions of the service can be determined at the time of reporting;

- Transaction expenses and service provision expenses can be identified.

1.3. If a business contract comprises more than one transaction, revenue from each of them must be separately identified. For instance:

- If the business contracts comprises goods sale and after-sale services (apart from common warranty terms), the enterprise must separate revenue from goods sale and service provision;

- If the contract stipulates that the seller is responsible for installation, the revenue shall only be recorded after the installation is completed;

- If the enterprise has the obligation to provide complimentary goods or services to the buyer or give discount, the account shall only record revenue from the provision of such complimentary goods/services until the obligation to the buyer is fulfilled.

1.4. Net revenue from goods sale and service provision in the accounting period may be lower than the initially recorded revenue because the enterprise gives discounts or goods are returned (because of unsatisfactory specifications or quality under business contracts);

In the cases where goods/services sold in previous periods are discounted in the current period or goods are returned, decreases in revenue shall be recorded as follows:

- If the goods/services sold in previous periods and discounted or returned in the current period before the financial statement is issued, this will be considered an event that occurs after the financial statement is prepared and decreases in revenue shall be recorded in the financial statement of the period.

- If the goods/services sold are discounted or returned in after the financial statement is issued, decreases in revenue shall be recorded in the period during which the event occurs.

1.5. Determination of revenues in some cases:

1.5.1. Revenues from goods sale or service provision exclusive of indirect taxes such as VAT (including VAT paid directly), special excise tax, export duty or environmental protection tax.

If indirect taxes cannot be separated when revenue is recorded, the revenue inclusive of taxes may be recorded and the taxes shall be periodically recorded as decreases in revenue. After an income statement is submitted the entry “Revenue from goods sale and service provision” and “Deductions from revenue” must exclude indirect taxes payable in the period because such indirect taxes are not considered part of the revenue in nature.

1.5.2. In the cases where the enterprise has issue a sale invoice and collect the payment but has not delivered the product to the buyer, the value of such product will not be considered a sale of the period and must not be recorded to Account 511 “Revenue from goods sale and service provision” and collected payment shall be recorded to Cr 131 “Trade receivables”. When the product is delivered to the buyer, the revenue will be recorded to Account 511 “Revenue from goods sale and service provision” if conditions for recording revenue are satisfied.

1.5.3. In the cases where the customer will only receive a promotional merchandise under certain conditions e.g. buy two get one free, etc. the payment shall be distributed to the promotional merchandise which is included in cost of goods sold, in which case the transaction in a decrease in selling price.

1.5.4. In the cases where an enterprise earns revenue from goods sale and service provision in foreign currency and receive advance payment from the customer, such advance payment shall be recorded at the actual exchange rate at the time of advance payment; the remaining amount shall be recorded at the time actual exchange rate at the time of recording.

1.5.5. Revenue from selling real estate by an enterprise that is also the investor shall comply with the following rules:

If the enterprise is the investor in a construction work or work item (even if the enterprise is also the executor), the enterprise must not record revenue from selling real estate and revenue from advance payments collected from customers. Revenue from selling real estate may be recorded when all of the following five conditions are satisfied:

- The real estate is completed and transferred to the buyer; the enterprise has transferred risks and benefits associated to the real estate ownership to the buyer;

- The enterprise no longer holds control over the real estate as its owner or controller;

- The revenue can be reliably determined.

- The enterprise has obtained or will obtain economic benefits from the sale;

- Selling expenses can be identified.

1.5.6. If the enterprise sells goods sold at fixed prices to earn commissions as an agent, revenue is the commissions to which the enterprise is entitled.

1.5.7. Regarding export-import entrustment, revenue is the entrustment fee.

1.5.8. Revenue from processing is the payment for processing exclusive of the value of the processed goods.

1.5.9. In case of instalment plan, the revenue shall be determined according to the asked price;

1.5.10. Rules for recording and determining revenue from a construction contract:

a) Revenue from a construction contract comprises:

- Initial revenue written in the contract;

- Increases and decreases during contract execution; bonuses and other payments that affect the revenue and can be reliably determined:

+ Revenue from the contract may increases or decreases by time. For instance: the contractor and customer agrees on changes and increases or decreases to revenue from the contract in the next period; the revenue agreed n the contract according to fixed prices may increase because of increases in such prices; the revenue from the contract may decrease because the contractor fails to adhere to the agreed schedule or construction quality; the revenue from a fixed price contract may increase or decrease when the volume of products increases or decreases

+ Bonuses are additional payments to the contractor when the contractor executes the contract or performs beyond expectation. Bonuses shall be included in revenue from the construction contract when: (i) certain targets of the contract will certainly be achieved or exceeded and (ii) the bonuses can be reliably determined.

- Other payments from the customers or third parties to cover expenses are not part of the contract value e.g. Customer’s lateness; errors in technical specifications or design; dispute over changes to contract execution. The determination of increases in revenue from such payments depends on many uncertain factors and negotiations. Therefore, they will only be included in revenue from a construction contract when:

+ The customer agrees to pay compensation after negotiations;

+ Other payments are accepted by the customer and can be reliably determined.

b) Revenue from a construction contract shall be recorded as follows:

When the construction contract outcome is reliably determined and certified by the customer, the revenues and expenditures related to the contract shall be recorded according to the completed works certified by the customer in the period as reflected by issued invoices.

c) If the outcome of a construction contract cannot be reliably estimated:

- Only the revenue corresponding to the contract expenses incurred the recovery of which is relatively certain shall be recorded;

- Contract expenses shall only be recorded as expenses in the period after they are incurred.

1.5.11. Do not receive the following amounts as revenue from goods sale or service provision:

- Value of goods, semi-finished products to be processed by external processors; value of deposited goods for sale by agents (not sold);

- Revenue from selling products of experimental production;

- Financial incomes;

- Other incomes

2. Structure and contents of Account 511 – Revenue from goods sale and service provision

Debit:

- Indirect taxes payable;

- Deductions from revenue;

- Net revenue transferred to Account 911.

Credit: Revenue from sale of goods, investment real property and service provision by the enterprise in the accounting period.

Account 511 does not have a closing balance.

Account 511 – Revenue from goods sale and service provision, comprising 4 sub-accounts:

- Account 5111 – Revenue from goods sales: reflecting revenue and net revenue from goods sale in an accounting period. This account is primarily used in trading of goods, supplies, food, etc.

- Account 5112 – Revenue from products: reflecting revenue and net revenue from sale of products (finished products, semi-finished products) in an accounting period. This account is primarily used in industry, agriculture, construction and installation, aquaculture, forestry, etc.

- Account 5113 – Revenue from service provision: reflecting revenue and net revenue from services provided for customers and considered sold in an accounting period. This account is primarily used in transport, postal services, tourism, public services, science and technology services, accounting and auditing services, etc.

- Account 5118 – Other revenues: reflecting revenue from transfer or liquidation of investment real property, state subsidies, etc.

Article 58. Account 515 – Financial income

1. Accounting rules

a) This account reflects the collection of interests, royalties, dividends, distributable profits and other financial incomes of the enterprise, including:

- Interests: loan interests, deposit interests, instalment interests, deferred payment interests, interests on bonds, treasury bills, payment discounts due to purchases of goods/services, etc.;

- Dividends and profits distributed after investment dates;

- Incomes from investment and trading in short-term and long-term securities; interest on stake transfer;

- Incomes from other investing activities;

- Exchange rate profits earned in the period and reassessment of foreign currency monetary items; profits on sale of foreign currencies;

- Other financial incomes.

b) Revenue from trading securities is the positive difference between the selling price and cost, which is the book value determined using the weighted average method of FIFO, according to the fair value of the proceeds. In case of securities trading in the form of shares swapping, the value of shares received shall be determined according to their fair value on the swapping date as follows:

- If the shares received are listed, their fair value is the closing price listed on the swapping date. In case the securities market is closed on the swapping date, the fair value of shares is the closing price of the session preceding the swapping date.

- If the received shares are unlisted, their fair value is the closing price announced on UPCOM on the swapping date. In case the UPCOM is closed on the swapping date, the fair value is the closing price of the session preceding the swapping date.

- If the received shares are other unlisted shares, their fair value is the price agreed by the parties or book value on the swapping date or at the end of the quarter preceding the swapping date. Book value of shares:

c) Revenue from foreign currency trading is the positive difference between the selling price and buying price.

d) Revenue from deposit interests does not include the interest on temporary investment in creation of unfinished assets;

dd) Revenues from loan interests, instalment interests shall only be recorded if the collection thereof is certain and the principal is not classified as overdue debts that need provisions.

e) Regarding interests on investment in shares or bonds, only the interests earned in the periods after the enterprise purchases them may be recorded as revenues earned in the period; accrued interests earned before the enterprise purchases them shall be recorded as decreases in their historical cost.

g) When an investor receives shares as dividends, he/she shall only monitor the increase in quantity of shares in the notes to financial statement; do not record the value of shares received, financial income and increase in investment value.

h) Foreign currency-related financial incomes shall be accounted for in accordance with provisions of Article 52 hereof.

2. Structure and contents of account 515 – Financial income

Debit:

- VAT payable determined according to direct method (if any);

- Net financial income transferred to Account 911.

Credit: Financial incomes earned in the period.

Account 515 does not have a closing balance.

Article 59. Rules for expense accounting

1. Expenses are decreases in economic benefits recorded when incurred or due to the high probability that they will be spent in the future, whether or not spent in reality.

2. Expenses are recognized before they are spent due to the high probability that that they will be spent to comply with conservatism principle and preserve capital. Expenses and revenues they created shall be simultaneously recorded according to matching principle. In certain cases where matching principle conflicts with conservatism principle, accountants shall record expenses according to the nature of the transaction.

3. Accountants accountant must keep records of expenses related to salaries, raw materials, purchases, fixed asset depreciations, etc.

4. If non-deductible expenses defined by the Law on Corporate income tax are accompanied with adequate documentary evidence and properly accounted for, they shall not be recorded as decreases in accounting expenses and shall be adjusted in the annual corporate income tax declaration to increase the amount of corporate income tax payable.

5. Expense accounts do not have balance. All expenses incurred in each period shall be carriedforward at its end to determine business performance.

Article 60. Account 611 – Purchases

1. Accounting rules

a) This account is intended to reflect values of raw materials, tools, instruments, goods (hereinafter referred to as “goods”) purchased, received or used in the period. Account 611 is only used by enterprises that apply the periodic inventory system.

b) The values of goods purchased shall be reflected in Account 611 according to historical cost principle.

c) Where the periodic inventory system is applied, the enterprise shall carryout stocktaking to determine the quantity and value of each type of goods in stock at the end of the accounting period to determine the value of inventory used and sold in the period.

d) Periodic inventory system: Historical cost of goods shall be recorded to Account 611 according to sale invoices, transport invoices, receipt note, import duty notice (or import duty payment receipt, etc.) when they are purchased. Goods used or sold shall be recorded once at the end of each period according to the stocktaking result.

dd) Accountants shall record specific historical cost of goods by category.

2. Structure and contents of account 611 – Purchases

Debit:

- Carriedforward historical cost of goods at the beginning of the period (according to stocktaking result);

- Historical cost of goods purchased in the period.

Credit:

- Carriedforward historical cost of goods at the end of the period (according to stocktaking result);

- Historical costs of goods used in the period or historical cost of goods sold or delivered for sale (not considered “sold”);

- Historical cost of goods purchased but returned to sellers or discounted.

Account 611 does not have a closing balance.

Article 61. Account 631 – Prime cost

1. Accounting rules

a) This account is intended to reflect production cost and calculate prime cost of goods/services of enterprises applying the periodic inventory system.

b) Enterprises applying perpetual inventory system do not use this account.

c) Only record the following costs to Account 631:

- Direct costs of raw materials;

- Direct labor cost;

- Costs of construction machinery (for construction);

- Factory overhead.

d) The following expenses shall not be recorded to account 631:

- Selling expenses;

- Administration expenses;

- Financial expenses;

- Other expenses;

dd) Expenses incurred by the production units and sale units serving the enterprise’ business operation, costs of goods and materials and processing expenses (internally or externally) are also reflected by Account 631.

e) Account 631 must be kept according to places where expenses are incurred and categories of goods/services.

g) Actual prime cost of agricultural products shall be determined at the end of the crop or year. The prime cost shall be calculated in the year in which products are harvested. To be specific, if the costs are incurred in one year but products are harvested in the next, the prime cost shall be calculated in the latter year.

- In farming, costs shall be classified according:

+ Short-term crops;

+ Multi-harvesting single plants (pineapples, bananas, etc);

+ Perennial plants.

For crops harvested two or three times in a year, crops harvested one time every two years and crops that may be planted and harvested at the same in the year, etc. the costs between two continuous crops, two areas, two continuous years, etc. shall be separately recorded. Do not record costs of planting and cultivating perennial plants during capital construction stage in Account 631.

Regarding the costs related to multiple accounting entities, multiple crops or multiple periods, they shall be recorded to separate accounts, then distributed to prime cost of relevant products: cost of irrigation water, the cost of land preparation and planting of crops harvested several times (this cost is not investment in capital construction), etc.

e) On the same farming area, if two or more short-term crops are intercropped, the costs related to each variety (seeds, cost of planting, harvesting, etc.) shall be recorded separately; costs of multiple varieties (plowing, irrigation, etc.) shall be distributed according to farming area.

Costs of perennial plants, the progress from tillage, sowing, plant care to the onset of production (harvesting or bearing) shall be recorded to account 241 “Capital construction in progress” similarly to investment in requisition of fixed assets.

- The expenses of animal husbandry must be sorted by type or group of animal (cattle, pig, etc); Large livestock and fattening animal shall be recorded to Account 631 according to their remaining value.

h) In transport, account 631 must be kept records in details for every operation (passenger transport, freight transport, etc.) During the transport process, the tires might be replaced several times because they are worn out more quickly than the depreciation rate of the vehicle. However, the value of tires shall be recorded as accrued expense or monthly depreciated instead of being included once in the prime cost of transport.

i) In hotel business, Account 631 is used to record every type of service, such as: food and drink, accommodation, entertainment, other services (laundry, haircuts, telegram, sports, etc).

2. Structure and contents of account 631 – Prime cost

Debit:

- Opening production expenses and selling expenses related to work in progress.

- Opening production expenses and selling expenses incurred in the period.

Credit:

- Prime cost of finished products and rendered services transferred to Account 632 “Cost of goods sold”.

- Closing production expenses and selling expenses transferred to Account 154 “Work in progress”.

Account 631 does not have a closing balance.

Article 62. Account 632 – Cost of goods sold

1. Accounting rules

a) This account reflects the costs of goods, services, investment property, prime cost of construction and installation products (of construction enterprises) sold in a period. This account also reflects expenses related to the sale of investment property such as: appreciation, repair, operating lease, liquidation costs, etc.

b) Provision against devaluation of inventory is included to cost of goods sold on the basis of the quantity of inventory and negative difference between net realizable value and historical cost of inventory. When determining the quantity of devaluated inventory requiring provision, accountants must remove those covered by concluded sale contracts (whose net realizable value is not lower than book value) but not delivered to customers if it is evident that such customers will not cancel the contract; remove inventory serving capital construction and inventory serving manufacture of products whose selling prices are not lower than their prime cost.

c) Accountants shall include the value of loss of goods in cost of goods sold (excluding compensations, if any).

d) Import duty, special excise tax, environmental protection tax that were included in the value of purchased goods and are refunded when they are sold shall be recorded as decreases in cost of goods sold.

e) If non-deductible expenses defined by the Law on Corporate income tax are accompanied with adequate documentary evidence and properly accounted for, they shall not be recorded as decreases in accounting expenses and shall be adjusted in the annual corporate income tax declaration to increase the amount of corporate income tax payable.

2. Structure and contents of account 632 – Cost of goods sold

2.1. Enterprises using perpetual inventory system.

Debit:

- Regarding goods/services:

+ Costs of goods/services sold in the period.

+ Cost of raw materials, labor in excess to the normal rate and non0allocated factory overhead that is included in cost of goods sold in the period;

+Loss of goods minus compensations paid by individuals;

+ Provision against devaluation of inventory (positive difference between provision against devaluation of inventory of the current year and unused provision of the previous year).

- Regarding investment property:

+ Depreciation of investment property for operating lease in the period;

+ Costs of repair, upgrade, renovation of investment property not qualified for inclusion in cost of investment property;

+ Operating lease expenses incurred in the period;

+ Remaining value of investment property sold or liquidated in the period;

+ Investment property sale or liquidation expenses incurred in the period;

+ Loss due to devaluation of investment property is held for capital appreciation;

+ Accrued expenses regarding real property considered “sold”.

Credit:

- Cost of goods/services sold in the period transferred to Account 911;

- Carriedforward investment property selling expenses incurred in the period;

- Reversed provision against devaluation of inventory at the end of the fiscal year (negative difference between current year’s provision against devaluation of inventory and the previous year’s provision).

- Value of goods returned;

- Reversed accrued expense regarding real property considered sold (positive unspent accrued expenses and spent actual expenses);

- Discounts received after sale;

- Increases in costs of investment property held for capital appreciation when it is evident that investment property will increase in prices;

- Import duty, special excise tax, environmental protection tax that included in the value of purchased goods and refunded when they are sold.

Account 632 does not have a closing balance.

2.2. Enterprises using periodic inventory system.

2.2.1. Goods-trading enterprises

Debit:

- Cost of goods sold in the period.

- Provision against devaluation of inventory (positive difference between current year’s provision against devaluation of inventory and unused provision of the previous year).

Credit:

- Carriedforward costs of goods delivered for sale but are not considered “sold”;

- Reversed provision against devaluation of inventory at the end of the fiscal year (negative difference between current year’s provision and previous year’s provision).

- Cost of goods sold transferred to Account 911.

2.2.2. Manufacturing and service-providing enterprises

Debit:

- Opening cost of finished products and services in stock;

- Provision against devaluation of inventory (positive difference between current year’s provision and unused provision of the previous year);

- Cost of finished products in stock and rendered services.

Credit:

- Closing cost of finished products and services in stock transferred to the debit side of Account 155 “Finished products” and Account 154 “Work in progress”;

- Reversed provision against devaluation of inventory at the end of the fiscal year (negative difference between current year’s provision and unused provision of the previous year);

- Cost of finished products sold and rendered services considered sold transferred to the debit side of Account 911.

Account 632 does not have a closing balance.

Article 63. Account 635 – Financial expenses

1. Accounting rules

a) This account reflects finance expenses, including:

- Loan interests, instalment interests, finance lease interests;

- Discounts given to buyers;

- Losses due to liquidation or sale of stakes; sale of securities;

- Exchange loss incurred in the period; exchange loss due to reassessment of foreign currency monetary items; Loss on sale of foreign currencies;

- Provision against devaluation of trading securities; provisions against impairment of investments in other entities;

- Costs of other financial investments;

- Other financial expenses.

b) Do not record the following amounts to account 635:

- Costs of production or service provision;

- Selling expenses;

- Administration expenses;

- Real estate trading expenses;

- Investment in capital construction;

- Expenses covered by other sources.

- Other expenses.

c) Foreign currency-related financial expenses shall be accounted for in accordance with provisions of Article 52 hereof.

2. Structure and contents of account 635 – Financial expenses

Debit:

- Financial expenses incurred in the period;

- Provision against devaluation of trading securities and provisions against impairment of investments in other entities (positive difference between provision of current period and that of previous period).

Credit:

- Provision against devaluation of trading securities and provisions against impairment of investments in other entities (negative difference between provision of current period and unused provision of previous period);

- Amounts recorded as decreases in financial expenses;

- Carriedforward financial expenses at the end of the accounting period.

Account 635 does not have a closing balance.

Article 64. Account 642 – Administration expenses

1. Accounting rules

1.1. This account reflects administration expenses, including selling expenses and administration expenses:

Selling expenses include expenses incurred during the process of selling goods/services, including offering, introduction and advertising expenses, commissions, warranty expenses (except construction), storage, packaging and delivery expenses, payment for sales persons (salaries and allowances, etc.), social insurance, health insurance, trade union fees, unemployment insurance, occupational accident insurance for sales persons; costs of working materials and depreciation of fixed assets of sales departments; external services (electricity, water, telephone, fax, etc.); other cash expenses.

Enterprise administration expenses include general administration expenses of the enterprise such as salaries and allowances of managers; social insurance, health insurance, trade union fees, unemployment insurance for managers; costs of office supplies, working instruments, depreciation of fixed assets used for enterprise management; land rents, license tax; allowance for bad debts; external services (electricity, water, telephone, fax, asset insurance, fire insurance, etc.); other cash expenses (public relations, events, etc.).

1.2. Selling expenses and enterprise administration expenses are not deductible from corporate income tax but if they are accompanied with adequate documentary evidence and properly accounted for, they shall not be recorded as decreases in accounting expenses and shall be adjusted in the annual corporate income tax declaration to increase the amount of corporate income tax payable.

1.3. Every specific expense shall be recorded to Account 642. Expenses recorded to Account 642 may be divided into selling expenses, enterprise administration expenses, etc.

a) Selling expense:

- Labor expenses: payments to sales persons, packaging, delivery, storage employees, etc. including their salaries, allowances for meals, contributions to social insurance, health insurance, unemployment insurance, trade union fees, etc.

- Packaging expenses: costs of materials and packages serving storage and sale of goods/services such as packaging materials, materials, serving repair and preservation of fixed assets, etc. used for sales departments.

- Costs of tools and instruments serving the sale of goods/services such as measuring, calculating, working instruments, etc.

- Depreciation of fixed assets of storage and sales departments such as warehouses, depots, outlets, material handling equipment, vehicles, calculating equipment, measuring equipment, quality control equipments, etc.

- Costs of product warranty. Costs of warranty of construction works shall be recorded to Account 154.

- Costs of external services such as lease of fixed assets serving the sales process, warehouse rents, payments for material handling and delivery services, commissions for agents and export trustees, etc.

- Other cash expenses incurred during the sales process other than the aforementioned expenses such as customer care expenses, product introduction, sales promotion, advertising, offering, customer convention expenses, etc.

b) Enterprise administration expenses:

- Costs of managers: Payments to enterprise managers such as salaries, allowances, social insurance, health insurance, unemployment insurance, trade union fees of the Board of Directors and department managers.

- Costs of management material: expenses of materials serving enterprise administration such as office supplies, materials serving repair of fixed assets, tools, instruments, etc. (the prices might be inclusive of exclusive of VAT).

- Office supplies expenses (the prices of which might be inclusive of exclusive of VAT)

- Depreciation of fixed assets used by the enterprise such as buildings, warehouses, structures, transmission equipment, management equipment in offices, etc.

- Taxes, fees and charges such as license tax, land rents, etc. and other fees and charges.

- Provisions: allowance for bad debts, provisions for payables included in the enterprise’s operating expenses.

- Costs of external services serving enterprise management; payments for purchase and use of technical documents, patents, etc. (not qualified as fixed assets) shall be gradually aggregated with enterprise administration expenses; rents for fixed assets; payments for subcontractors.

- Other cash expenses: Other management expenses of the enterprise apart from the aforementioned expenses such as: convention expenses, business trip expenses, traveling expenses, expenditures on female workers, etc.

1.4. Regarding promotional merchandise:

- Values of promotional merchandise that are given unconditionally shall be recorded as selling expenses.

- Values of promotional merchandise that are given conditionally (buy 2 get one free, etc.) shall be recorded as cost of goods sold.

- In the cases where a trading enterprise receives merchandise (not money) from a manufacturer or distributor for advertising or sales promotion purposes:

+ The distributor must monitor the quantity of such merchandise in their internal management system and specify it in the Notes to financial statement.

+ At the end of the sales promotion period, the remaining promotional merchandise that is not returned to the manufacturers shall be recorded as other income.

2. Structure and contents of Account 642

Debit:

- Administration expenses incurred in the period;

- Allowance for bad debts and payables (positive difference between provision of the current period and unused provision of the previous period);

Credit:

- Decreases in administration expenses;

- Reversed allowance for bad debts and payables (negative difference between provision of the current period and unused provision of the previous period);

- Administration expenses transferred to Account 911.

Account 642 does not have a closing balance.

Account 642 comprises:

- Account 6421 – Selling expenses: reflecting selling expenses incurred during the process of selling goods and providing services, transfer of selling expenses to Account 911.

- Account 6422 – Enterprise administration expenses: reflecting general administration expenses incurred in the period and transferred to Account 911.

Article 65. Account 711 – Other incomes

1. Accounting rules

a) This account reflects the incomes other than those from the enterprise’s ordinary business operation, including:

- Income from sale, liquidation of fixed assets;

- Positive differences between fair values of distributed assets under BCCs and investment in assets under joint ownership;

- Interest differences due to reassessment of goods or fixed assets contributed as capital in jointly controlled entities or associate companies and other investments;

- Taxes payable when selling goods/services and then reduced or refunded;

- Collected fines for breach of contract from customers;

- Collected compensations from third parties to reimburse for loss of assets e.g. insurance indemnities, compensation for business relocation and similar amounts);

- Collected bad debts;

- Collected debts without identified creditors;

- Bonuses for customers related to sale of goods/services not included in revenue (if any);

- Gifts in cash or in kind for the enterprise;

- Value of promotional merchandise not returned to manufacturers;

- Other incomes.

b) If the collection of fines for breach of contract is certain, accountants shall consider the nature of the fines and classify them as follows:

- For the seller: Fines for breach of contracts collected from the buyer other than contract value shall be recorded as other income.

- For the buyer:

+ All the fines in nature are discounts on purchased goods and shall be recorded as decreases in asset values or payments (no other income) unless relevant assets have been sold or liquidated.

For instance, when the building contractor runs behind schedule, the investor may impose a fine by withdrawing part of the payment. Such withdrawal will be recorded as a decrease in construction value. However, if the fine is collected after the asset is sold or liquidated, it will be recorded as other income.

+ Other fines shall be recorded as other income earned in the period e.g. the buyer is entitled to receive the merchandise and impose a fine if the seller fails to deliver it on schedule according to the contract, in which case the fine will be recorded as other income if its collection is certain. If the buyer still receives the merchandise and the fine is deducted from the amount payable, the amount payable in reality will be recorded as merchandise value; the fine shall not be recorded as other income.

2. Structure and contents of Account 711 – Other incomes

Debit:

- VAT payable (if any) on other incomes if the enterprise pays VAT directly.

- Other incomes earned in the period and transferred to Account 911.

Credit: Other incomes earned in the period.

Account 711 does not have a closing balance.

Article 66. Account 811 – Other expenses

1. Accounting rules

a) This account reflects expenses incurred due to events or operations other than the enterprise’s ordinary operations. Other expenses may include:

- Fixed asset liquidation or sale expenses (including bidding expenses). The proceeds from selling bidding documents shall be recorded as decreases in fixed asset liquidation or sale expenses;

- Negative differences between fair values of distributed assets under BCCs and investment in assets under joint ownership;

- Remaining value of demolished fixed assets;

- Remaining value of investment property sold or liquidated;

- Loss due to reassessment of goods or fixed assets contributed as capital in jointly controlled entities or associate companies and other investments;

- Fines payable for breach of contract or administrative violations;

- Other expenses.

b) If non-deductible expenses defined by the Law on Corporate income tax are accompanied with adequate documentary evidence and properly accounted for, they shall not be recorded as decreases in accounting expenses and shall be adjusted in the annual corporate income tax declaration to increase the amount of corporate income tax payable.

2. Structure and contents of Account 811 – Other expenses

Debit: Other expenses incurred.

Debit: Other expenses incurred in the period and transferred to Account 911.

Account 811 does not have a closing balance.

Article 67. Account 821 - Corporate income tax

1. Accounting rules

a) Corporate income tax accounting rules

- This account reflects corporate income tax earned in the year as the basis for determination of the enterprise after-tax outcome in the current fiscal year.

- Corporate income tax recorded to this account is the amount of corporate income tax on taxable income earned in the year and the applicable corporate income tax rate.

- Accountant shall record corporate income tax payable quarterly according to tax payment documents. At the end of the fiscal year, according to the annual tax declaration, if the corporate income tax paid in the year is smaller than the amount payable, accountants shall record the additional amount of corporate income tax payable to this account.

- Immaterial errors in the corporate income tax payable of previous years may be recorded as increases or decreases in corporate income tax payable in the year in which such errors are discovered.

- In case of material errors, accountants shall make retroactive adjustments.

- When preparing a financial statement, accounting shall transfer corporate income tax to Account 911.

2. Structure and contents of account 821 – Corporate income tax

Debit:

- Corporate income tax incurred in the year;

- Corporate income tax arrears of previous years due to immaterial errors recorded as increases in corporate income tax payable in the current year.

Credit:

- Negative difference between corporate income tax payable in the year and corporate income tax paid in reality, which is recorded as a decrease in corporate income tax of the year.

- Decreases in corporate income tax payable due to previous years’ immaterial errors;

- Positive difference between corporate income tax incurred in the year and the decrease in corporate income tax in the year transferred to Account 911.

Account 821 does not have a closing balance.

Article 68. Account 911 – Business performance

1. Accounting rules

a) This account reflects outcomes of the enterprise’s business operations and other activities in an accounting period. An enterprise’s business outcome includes the outcome of business operation, outcome of financing activities and outcome of other activities.

- The outcome of business operation is the difference between net revenue and cost of goods sold (including goods, investment property, services, prime cost of construction, expenses relevant to sale of investment property such as: depreciation, costs of repair, upgrade, operating lease, liquidation), selling expenses and enterprise administration expenses.

- The outcome of financing activities is the difference between financial income and financial expense.

- The outcome of other activities is the different between other incomes and other expenses and corporate income tax.

b) This account must accurate reflect the business outcome of an accounting period. An enterprise’s business outcome shall be sorted by type (production, processing, trading, service provision, financing activities, etc.). Each category may be divided into subcategories.

c) Revenues and incomes transferred to this account are net revenues and net incomes.

2. Structure and contents of Account 911

Debit:

- Cost of goods, investment property and services sold;

- Financial expenses, corporate income tax and other expenses;

- Selling expenses and enterprise administration expenses;

- Carriedforward profits.

Credit:

- Net revenue from goods, investment property and services sold in the period;

- Financial incomes, other incomes and decreases in corporate income tax;

- Carriedforward loss.

Account 911 does not have a closing balance.

Chapter III

FINANCIAL STATEMENTS

SECTION 1. GENERAL PROVISIONS

Article 69. Purposes of financial statements

1. The financial statement is intended to provide information about an enterprise’s finance, business performance and cash flows to meet the needs for management of its owner, regulatory bodies and other users in making business decisions. A financial statement must provide information about an enterprise’s:

a) Assets;

b) Liabilities;

c) Equity;

d) Other incomes, operating expenses and other expenses;

dd) Profit, loss and distribution of business outcome.

2. Apart from the aforementioned information, the enterprise must provide other information in the notes to financial statement to provide further explanation for the financial statement and accounting policies applied.

Article 70. Scope, responsibility to prepare financial statements and signatures thereon

1. Annual financial statements shall be prepared by:

Every small and medium enterprise in every field and economic sector in Vietnam.

2. Financial statements shall be signed in accordance with the Law on Accounting. In the cases where an enterprise hires an external service provider to prepare its financial statement, the preparer shall sign and specify the number of his/her certificate of accounting service registration and his/her workplace on the financial statement.

Article 71. Financial statement system

1. The annual financial statement system applied to small and medium enterprises satisfying the going concern assumption include:

a) Mandatory statements:

The enterprise may use Form B01b - DNN instead of Form B01a – DNN to prepare the financial position statement if it is more appropriate.

The financial statement submitted to the tax authority must be enclosed with the balance sheet (Form F01 - DNN).

b) Optional statements:

2. The annual financial statement system applied to small and medium enterprises not satisfying the going concern assumption include:

a) Mandatory statements:

b) Optional statements:

3. The mandatory annual financial statement system applied to ultra-small enterprises includes:

The forms above shall be used for preparation of financial statements. Enterprises may adjust the form to suit their operation as long as such adjustments are approved by the Ministry of Finance before application.

An enterprise may prepare other statements to satisfy its needs for business administration.

4. The contents and presentation of statements shall be consistently applied to small and medium enterprises.

Article 72. Information in financial statement

1. Information in a financial statement must be adequate, objective and correct to truthfully and reasonably reflect the enterprise’s finance and business performance.

- Information is considered adequate when it is able to help the financial statement users understand the nature, forms and risks of the transactions and events therein. For certain entries, it is required to contain additional description of quality, factors and situations that might affect their quality and nature.

- Objective presentation means being impartial when selecting or describing financial information. Objective presentation must ensure neutrality without emphasizing or mitigating or changing the influence of financial information in a way that is advantageous or disadvantageous to financial statement users.

- Correctness means no omission in description of phenomena and no errors in provision of selected and applied information. Correctness does not mean absolute accuracy in every aspect e.g. accuracy of estimated unobservable prices and values. The presentation of an estimate is considered truthful if the estimate is clearly described, its nature and limitations of the estimation process are explained and there are no errors in selection of appropriate data in the estimation process.

2. Financial information must be suitable for financial statement users to anticipate, analyze and make business decisions.

3. Financial information must be presented in every material aspect. Information is considered material if the lack or inaccuracy of which will affect financial statement users’ decision making. The importance depends on the nature or scope or both of the entries presented in the financial statement.

4. Financial information must be verifiable and understandable.

5. Financial information must be consistently presented and comparable between accounting periods and among small and medium enterprises.

6. Entries without data may be excluded from the financial statement. Enterprises may change the order of entries in each part.

Article 73. Rules for preparing and presenting financial statements of enterprises satisfying the going concern assumption

1. A financial statement must correctly reflect the nature of transactions and events rather than their legal form.

2. The value of an asset be recorded must not be higher than the recoverable value; the value of a liability be recovered must not be lower than the value payable.

3. Classification of assets and liabilities: assets and liabilities on a financial position statement shall be sorted by liquidity in descending order, or by term (short-term and long-term). Those in the financial position statement of an extra-small enterprise may be sorted by liquidity in descending order.

4. If assets and liabilities of a financial position statement are sorted by term.

Assets and liabilities in the financial position statement shall be classified as short-term and long-term according to the enterprise’s ordinary score of business. To be specific:

a) If the enterprise’s ordinary score of business is 12 months, its assets and liabilities shall be classified as short-term and long-term as follows:

- Assets to be obtained or liabilities to be paid within 12 months from the date of the financial statement shall be classified as short-term;

- Assets to be obtained or liabilities to be paid after 12 months from the date of the financial statement shall be classified as long-term.

b) If the enterprise’s ordinary score of business longer than 12 months, its assets and liabilities shall be classified as short-term and long-term as follows:

- Assets to be obtained or liabilities to be paid within an ordinary course of business shall be classified as short-term;

- Assets to be obtained or liabilities to be paid after an ordinary course of business shall be classified as long-term.

In this case, the enterprise must explain its ordinary course of business and provide evidence.

c) Regarding enterprises whose assets and liabilities cannot be classified by term because of the nature of their operations, their assets and liabilities shall be presented as instructed in (a).

5. Assets and liabilities shall be separately presented. Only assets and liabilities related to the same entity, derived from the transactions and events of the same category may be offset against each other.

6. Revenues, incomes and expenses shall be presented in accordance with matching principle and conservatism principle. The income statement and cash flow statement reflect the revenues, incomes, expenses and cash flows of the accounting period. Material errors in revenues, incomes, expenses of previous periods that affect the business performance and cash flows must be retrospectively adjusted by making another statement instead of directly adjusting the erroneous statement. Extra-small enterprises may directly adjust the erroneous statements.

Article 74. Rules for preparing and presenting financial statements of enterprises not satisfying the going concern assumption

1. When preparing a financial statement, the enterprise is considered satisfying going concern assumption. An enterprise does not satisfy going concern assumption if it fails to submit an application for extension of the operation period, is dissolved, bank rapt, shut down (according to written notification to a competent authority) within 12 months from the day on which the financial statement is prepared (for enterprises whose ordinary course of business is not longer than 12 months) or within an ordinary course of business (for enterprises whose ordinary course of business is longer than 12 months).

2. An enterprise satisfies going concern assumption in the following cases:

- Change of form of ownership, change of type of business entity e.g. conversion of a limited liability company into a joint-stock company and vice versa;

- Conversion of a unit having an independent legal status into a unit without independent legal status e.g. conversion of a subsidiary company into a branch or vice versa.

3. When an enterprise does not satisfy the going concern assumption, the financial statement must specify that:

- The enterprise does not satisfy the going concern assumption and the financial position statement is prepared according to Form B01 – DNNKLT;

- The income statement and cash flow statement are prepared according to B02 - DNN and B03 - DNN;

- The notes to financial statement are prepared according to Form B09 - DNNKLT.

4. In the cases where an enterprise no longer satisfies going concern assumption at the time of preparing the financial statement, the enterprise shall classify its assets and liabilities by liquidity in descending order in instead of by term.

5. In the cases where an enterprise no longer satisfies going concern assumption at the time of preparing the financial statement, the enterprise shall reassess its assets and liabilities unless a third party inherits its assets or liabilities according to book values. The enterprise shall record the reassessed values to accounting books before preparing the financial position statement.

5.1. Some cases in which an enterprise is not required to reassess its assets and liabilities when there is a third party inherits its assets or liabilities:

a) A unit is merged into another unit and the acquirer is committed to inherit all rights and obligations of the acquired according to book values;

b) A unit is divided into smaller units which are committed to inherit all rights and obligations of the divided unit according to book values;

c) A third party guaranties to acquire the assets of the dissolved unit according to book values and such acquisition takes place before the official date of shutdown of the dissolved unit;

c) A third party guaranties to acquire the liabilities of the dissolved unit and the dissolved unit only has the obligation to pay such third party at book values;

5.2. Rules for reassessment of assets and liabilities:

(a) Assets:

- Reassessed value of inventory shall be the lesser of the historical cost and net realizable value at the time of preparing the financial statement;

- Reassessed value of a tangible fixed asset, intangible fixed asset and or piece of investment property shall be the lesser of the remaining value and recoverable value at the time of preparing the financial statement (liquidation price minus estimated liquidation expenses) Reassessed value of a finance lease asset, if repurchase of which is mandatory, shall be value of the remaining finance lease liabilities payable to the lessor if it will be returned to the lessor;

- Reassessed value of construction in progress shall be the lesser of the lower value and the recoverable value at the time of preparing the financial statement (liquidation price minus estimated liquidation expenses);

- Reassessed value of registered securities shall be their fair value. Fair value of listed securities or UPCOM securities is the closing price of closing price on the reporting date (or the preceding session if the market is closed on the reporting date);

- Investments in other entities shall be recorded at their book values or recoverable values at the time of reporting (intended selling price minus estimated selling expenses), whichever is lower;

- Reassessed values of held to maturity investments and receivables shall be recoverable amounts in reality.

b) Reassessed values of liabilities shall be agreed by the parties in writing. If there is no agreement:

- Reassessed value of a cash liability shall be the higher of its book value and value of the liability paid ahead of schedule according to the contract;

- Reassessed value of a primary asset liability shall be the higher of its book value and fair value at the time of reporting;

- Reassessed value of a liability in the form of inventory shall be the higher of its book value and its buying price (plus directly attributable costs) or prime cost of inventory at the time of reporting;

- Reassessed value of a liability in the form of a fixed asset shall be the higher of its book value and its buying price (plus directly attributable costs) or remaining value at the time of reporting.

c) Foreign currency monetary items shall be reassessed at the closing average transfer rate of the enterprise’s regular bank at the reporting time if the enterprise satisfies the going concern assumption.

6. Regarding an enterprise not satisfying the going concern assumption:

a) Provisions or losses of assets shall be recorded as decreases in book values of assets; do not make a provision in Account 299 – “Provisions for loss of assets”;

b) Depreciation or losses of fixed assets and investment property shall be recorded as decreases in their book values; do not use Account 214 to reflect accumulated depreciation.

7. When an enterprise no longer satisfies the going concern assumption:

- Future losses shall be recorded as accrued expenses if the incurrence of such losses is relatively certain and their values can be reliably determined; Current liabilities shall be recorded even if documents are inadequate if the payment thereof is certain.- The enterprise shall record all accumulated exchange differences on the financial position statement (such as exchange differences from conversion of the financial statement into VND) as financial income (in case of profits) or financial expenses (in case of losses).

- All remaining prepaid expenses such as goodwill derived from business consolidation that does not result in a parent company-subsidiary company relationship; tools and instruments in use; enterprise establishment expenses; launching expenses, etc. shall be recorded as decreases to expenses. Prepaid expenses related to asset lease, prepaid loan interests shall be allocated according to the remaining prepayment period until official date of shutdown;

- Remaining differences between profits and losses of an enterprise satisfying the going concern assumption when reassessing assets and liabilities after being offset against provisions (if any) shall be recorded as financial incomes, other incomes, financial expenses or other expenses on a case-by-case basis.

8. In the cases where an enterprise no longer satisfies going concern assumption at the time of reporting, the enterprise shall explain the ability to generate cash and pay debts and equity to shareholders, and explain the incomparability of information of the current period and that of the comparable period. To be specific:

- Probable proceeds from liquidation of assets or collection of debts;

- Ability to pay debts in order of priority such as state budget, employees, lenders, suppliers;

- Ability to pay owners (payment per share if the enterprise is a joint-stock company);

- Time limit for paying debts and equity.

- Reason for failure to compare information: The financial statement of the previous period was prepared according to the form for enterprises satisfying the going concern assumption. The financial statement is prepared under different accounting policies (not satisfying the going concern assumption) because the enterprise is undergoing dissolution, bankruptcy or shutdown under a decision by a competent authority (specify name of authority and decision number) or the Board of Directors (specify decision number and date).

Article 75. Rules for preparing and presenting financial statements when changing accounting cycle

When the accounting cycle is changed e.g. from calendar year to another cycle, the enterprise shall close its accounting books and prepare a financial statement as follows:

1. The change of the accounting cycle must comply with provisions of the Law on Accounting. If the annual accounting cycle is changed, accountants shall prepare a separate financial statement for the period between the old and new accounting periods.

Example: An enterprise’s accounting period of 2014 is the same as the calendar year. In 2015, its accounting period begins on April 1 of the year to March 31 of the succeeding year. In this case a separate financial statement for the period from January 01, 2015 to March 31, 2015 must be prepared.

2. Regarding financial position statement: all assets, liabilities and equity of the previous period shall be recorded as opening balance of the new period.

3. Regarding income statement and cash flow statement: data from the change of accounting cycle to the end of the first period shall be recorded in “This period” column; data of the last 12 months shall be recorded in “Previous period” column.

Example: In the same situation, data from April 1, 2014 to March 31, 2015 will be recorded in “Previous column” of the income statement.

Article 76. Rules for preparing and presenting financial statements in case of enterprise conversion

A converted enterprise shall close its accounting books and prepare the financial statement as prescribed by law. In the first accounting period after conversion, the enterprise shall prepare its accounting books and financial statement as follows:

1. In accounting books of the new enterprise, all assets, liabilities and equity of the old enterprise shall be recorded as opening balance.

2. In the financial position statement of the new enterprise, all assets, liabilities and equity inherited from the old enterprise shall be recorded as opening balance.

3. In the income statement and cash flow statement, data from the change of accounting cycle to the end of the first period shall be recorded in “This period” column; data of “This period” of the previous statement shall be recorded in “Previous period” column. The reasons for failure to compare data in “Previous period” column and “This period” column must be specified in the notes to financial statement.

Article 77. Rules for preparing and presenting financial statements upon divisions, consolidation and merger of enterprises

1. The accounting unit that is partially or fully divided, or consolidated with another (the transferor) shall perform accounting tasks defined by the Law on Accounting. The new accounting unit (the transferee) shall perform accounting tasks of the first period as follows:

- All assets, liabilities and equity in accounting books of the transferor shall be transferred to the transferee.

- In the financial position statement of the transferee, the opening balance is empty and must be explained in the notes to financial statement.

- In the income statement and cash flow statement, only data from the division or consolidation time to the end of the period shall be recorded to “This period” column. The “Previous period” is empty and must be explained in the notes to financial statement.

2. In case of merger, the acquirer (the transferee) shall perform accounting tasks defined by the Law on Accounting. To be specific:

- All assets, liabilities and equity in accounting books of the acquired (the transferor) shall be transferred to the transferee. Opening balance of the transferee will remain unchanged.

- Regarding financial position statement: all assets, liabilities and equity of the transferor shall be recorded to “Ending balance” of the transferee. The “Opening balance” column of the transferee will remain unchanged.

- Regarding income statement and cash flow statement: all data of the transferor shall be recorded to “This period” column of the transferee and explained in the notes to financial statement.

Article 78. Currency in financial statements made publicly available and submitted to Vietnamese regulatory bodies

1. The currency in a financial statement that is made publicly available or submitted to Vietnamese regulatory bodies must be VND. In the cases where a financial statement is uses a foreign currency, it must be converted into VND and enclosed with the financial statement in foreign currency when made publicly available and submitted to Vietnamese regulatory bodies. Financial statements serving determination of enterprises’ tax liability shall be made in accordance with tax laws.

2. Method for conversion of a financial statement in foreign currency into VND:

a) Accountants shall carry out the following conversions:

- Assets and liabilities shall be converted into VND at the closing average transfer rate of the enterprise’s regular bank;

- Equity (capital contributed by owners, share premium, other capitals) shall be converted into VND at actual exchange rates on contribution dates;

- Undistributed after-tax profits and funds derived therefrom shall be converted into VND according to income statement;

- Paid profits and dividends shall be converted into VND at actual exchange rates on payment dates;

- Items in the income statement and cash flow statement shall be converted into VND at actual exchange rates on occurrence dates or the annual average transfer rate (if the average exchange rate is close to the actual rate).

b) Accounting of exchange differences due to conversion of financial statement into VND.

Exchange differences due to conversion of a financial statement into VND shall be recorded to “Exchange difference” in equity part of the financial position statement.

Article 79. Rules for preparing financial statements in case of change in accounting currency

1. When the accounting currency is changed, in the first period from the day on which such change is made, accountants shall convert the balances in accounting books at the closing average transfer rate of the enterprise’s regular bank on the date of change.

2. The average transfer rate of the preceding period shall apply to comparable information in the income statement and cash flow statement of the period in which accounting currency is changed.

3. When changing accounting currency, the enterprise shall specify the reasons and its effects to the financial statement on the notes to financial statement.

Article 80. Responsibility and time limit for preparing and submitting financial statement

1. Responsibility and time limit for preparing and submitting a financial statement:

a) Every small and medium enterprise shall prepare and send its financial statement within 90 days from the end of the fiscal years to relevant authorities.

b) Apart from the annual financial statement, an enterprise may prepare monthly or quarterly financial statements if necessary.

2. Recipients of annual financial statements:

Annual financial statements shall be submitted to tax authorities, business registration authorities and statistics authorities.

In addition to the aforementioned authorities, enterprises (both Vietnamese enterprises and foreign-invested enterprises) in export-processing zones, industrial parks, hi-tech zones shall submit their financial statements to the management boards thereof.

SECTION 2. FINANCIAL STATEMENTS OF SMALL AND MEDIUM ENTERPRISES

Article 81. Instructions for preparing and presenting the financial statement

1. General information about the enterprise

The annual financial statement shall specify:

- The enterprise’s name and address;

- Ending date of the accounting period;

- Date of the financial statement;

- Accounting currency;

- Currency of the financial statement.

2. Preparation and presentation of the financial position statement

2.1. Basis for preparation of the financial position statement:

- The general accounting books;

- Other accounting documents;

- The previous year’s financial position statement (opening balance).

2.2. Contents of the financial position statement:

2.2.1. For enterprises satisfying the going concern assumption (Form B01a - DNN)

a) Assets

- Cash and cash equivalents (Entry 110)

This entry reflects cash in funds, demand deposits and cash equivalents of the enterprise at the reporting time.

Total debit balance of Account 111, Account 112, Account 1281 (sub-account: term deposits with original terms of up to 3 months) and Account 1288 (sub-account: cash equivalents) shall be recorded to this entry.

While preparing the financial statement, other amounts qualified as cash equivalent in other accounts may be presented in this entry. Cash equivalents may include promissory notes, treasury bills, etc.

Overdue cash equivalents that are not collected must be transferred to appropriate entries.

In analysis of the entries, apart from the cash equivalents in this entry, the amounts with original terms longer than 3 months that are due within less than 03 months from the reporting date and can be easily converted into certain amounts of money without posing risks may be considered cash equivalents.

- Financial investments (Entry 120)

This entry reflects total financial investments (minus provision for loss on financial investment) of the enterprise at the reporting time, including: trading securities, held to maturity investments and investments in other entities.

Financial investments reflected in this entry does not include those reflected by Entry 110 and collected debts reflected by Entry 134 (Other receivables).

Entry 120 = Entry 121 + Entry 122 + Entry 123 + Entry 124.

+ Trading securities (Entry 121)

This Entry reflects securities and other financial instruments held for trading at the reporting time. This entry may include financial instruments that are not securitized such as commercial papers, forward contracts, swap contracts, etc. held for trading.

This entry shall reflect the debit balance of Account 121.

+ Held to maturity investments (Entry 122)

This entry reflects held to maturity investments at the reporting time such as term deposits, bonds, commercial papers and other debt instruments. This entry does not include held to maturity investments reflected by Entry 110 and collected debts reflected by Entry 134.

This entry shall reflect the debit balance of Account 1281 and Account 1288.

+ Investment in other entities (Entry 123)

This entry reflects investments in jointly controlled entities and associate companies and other investments.

This entry shall reflect the debit balance of Account 228.

+ Provision for loss on financial investments (Entry 124)

This entry reflects the provision against devaluation of trading securities and provisions against impairment of investments in other entities at the time of reporting.

This entry shall reflect the credit balance of Account 2291 and Account 2292 in round brackets (negative numbers).

- Other receivables (Entry 130)

This entry reflects all receivables at the reporting time such as trade receivables, advance payments to sellers, working capital in affiliated units, other receivables, unresolved asset losses minus allowance for bad debts.

Entry 130 = Entry 131 + Entry 132 + Entry 133 + Entry 134 + Entry 135 + Entry 136.

+ Trade receivables (Entry 131)

This entry reflects receivables from customers at the reporting time.

This entry shall reflect the debit balance of Account 131.

+ Advance payments to sellers (Entry 132)

This account reflects advance payments to sellers for goods/services before receiving them at the reporting time.

This entry shall reflect the debit balance of Account 331.

+ Working capital in affiliated units (Entry 133)

This entry is only presented in the financial position statement of the superior unit to reflect working capital provided for affiliated units. When preparing a consolidated financial position statement, this entry shall be offset against Entry 317 (Working capital provided for affiliated units) or Entry 411 (Capital contributions by owners) on financial position statements of affiliated units.

This entry shall reflect the debit balance of Account 1361.

+ Other receivables (Entry 134)

This Entry reflects other receivables at the reporting time such as intra-company receivables other than working capital; loans and payments on behalf of third parties; interests, distributable dividends; deposits, etc. to be collected by the enterprise.

When the superior unit prepares a consolidated financial position statement, intra-company receivables other than those specified in this Entry shall be offset against intra-company payables (Entry 315) on financial position statements of the affiliated units.

This entry shall reflect the debit balance of Accounts 1288, 1368, 1386, 1388, 334, 338 and 141.

+ Unresolved asset losses (Entry 135)

This entry reflects losses of assets for which causes are not identified at the reporting time.

This entry shall reflect the debit balance of Account 1381.

+ Allowance for bad debts (Entry 136)

This entry reflects allowance for bad debts at the reporting time.

This entry shall reflect the credit balance of Account 2293 in round brackets (negative numbers).

- Inventory (Entry 140)

This entry reflects current value of inventory serving the enterprise’s business operation (minus provision against devaluation of inventory) at the reporting time.

Entry 140 = Entry 141 + Entry 142.

+ Inventory (Entry 141)

This entry reflects total value of inventory under the enterprise’s ownership at the reporting time.

This entry reflects the debit balance of Accounts 151, 152, 153, 154, 155, 156 and 157.

+ Provision against devaluation of inventory (Entry 142)

This entry reflects provision against devaluation of inventory at the reporting time.

This entry reflects the credit balance of Account 2294 in round brackets (negative numbers).

- Fixed assets (Entry 150)

This entry reflects total remaining value of fixed assets at the reporting time.

Entry 150 = Entry 151 + Entry 152.

+ Cost (Entry 151)

This entry reflects total costs of fixed assets at the reporting time.

This entry reflects the debit balance of Account 211.

+ Accumulated depreciation (Entry 152)

This entry reflects accumulated depreciation of fixed assets at the reporting time.

This entry reflects the credit balance of Accounts 2141, 2142, 2143 in round brackets (negative numbers).

- Investment property (Entry 160)

This entry reflects total remaining value of investment property at the reporting time.

Entry 160 = Entry 161 + Entry 162.

+ Cost (Entry 161)

This entry reflects total costs of investment property at the reporting time minus (-) loss on devaluation of investment property held for capital appreciation.

This entry reflects the debit balance of Account 217.

+ Accumulated depreciation (Entry 162)

This entry reflects accumulated depreciation of investment property for lease at the reporting time.

This entry reflects the credit balance of Account 2147 in round brackets (negative numbers).

- Construction in progress (Entry 170)

This entry reflects total value of fixed assets being purchased, investment in capital construction, costs of major repairs of fixed assets that are unfinished or finished but not transferred or put into operation at the reporting time.

This entry reflects the debit balance of Account 241.

- Other assets (Entry 180)

This entry reflects total value of other assets at the reporting time such as deductible VAT and other assets at the reporting time.

Entry 180 = Entry 181 + Entry 182.

+ Deductible VAT (Entry 181)

This entry reflects deductible VAT and refundable VAT at the reporting time.

This entry reflects the debit balance of Account 133.

+ Other assets (Entry 182)

This entry reflects total value of other assets at the reporting time such as prepaid expenses, taxes and other excess payments to the State.

This entry reflects the debit balance of Accounts 242 and 333.

- Total assets (Entry 200)

This entry reflects the total value of the enterprise’s assets at the reporting time.

Entry 200 = Entry 110 + Entry 120 + Entry 130 + Entry 140 + Entry 150 + Entry 160 + Entry 170 + Entry 180.

b) Liabilities (Entry 300)

This entry reflects total liabilities at the reporting time.

Entry 300 = Entry 311 + Entry 312 + Entry 313 + Entry 314 + Entry 315 + Entry 316 + Entry 317 + Entry 318 + Entry 319 + Entry 320

+ Trade payables (Entry 311)

This entry reflects the amounts payable to sellers at the reporting time. This entry reflects the total credit balance of Account 331.

+ Advance payments by buyers (Entry 312)

This entry reflects advance payments by buyers for goods/services, fixed assets, investment property to be provided by the enterprise at the reporting time (excluding prepaid revenues).

This entry reflects the total credit balance of Account 131.

+ Taxes and other payables to the State (Entry 313)

This entry reflects total amounts payable by the enterprise to the State at the reporting time, including taxes, fees, charges and other amounts payable.

This entry reflects the total credit balance of Account 333.

+ Payables to employees (Entry 314)

This entry reflects the amounts payable by the enterprise to its employees at the reporting time. This entry reflects the credit balance of Account 334.

+ Other payables (Entry 315)

This entry reflects other payables at the reporting time such as costs payable, intra-company payables other than working capital; assets in surplus without identified causes, amounts payable to social insurance authorities, trade union fees, received deposits, unrealized revenues, etc.

When the superior unit prepares a consolidated financial position statement, intra-company payables other than those specified in this Entry shall be offset against intra-company receivables (Entry 134) on financial position statements of the affiliated units.

This entry reflects the credit balance of Accounts 335, 3368, 338 and 1388.

+ Borrowings and finance lease liabilities (Entry 316).

This entry reflects total value of the enterprise’s loans taken from banks, other organizations, financial companies and other entities, including loans taken by issuance of bonds or preferred shares classified as liabilities at the reporting time.

This entry reflects the detailed credit balance of Accounts 341 and 4111 (preferred shares classified as liabilities).

+ Working capital provided for affiliated units (Entry 317)

Depending on the enterprise’s management model, it shall request its affiliated units to record capital it provides to this entry or Entry 411 (Capital contributed by owners).

This Entry is only presented on financial position statements of affiliated units and reflects the amounts payable by affiliated units to the superior unit in terms of working capital

This entry reflects the detailed credit balance of Account 3361. When the superior unit prepares a consolidated financial position statement, this entry shall be offset against Entry 133 on financial position statements of the superior unit.

+ Provision for payables (Entry 318)

This entry reflects the provisions for future payables at the reporting time i.e. provisions for warranty, accrued expenses for periodic repair of fixed assets, etc. Provisions for payables are usually estimated without certain payment time, values and the enterprise has not received goods/services from suppliers.

This entry reflects the credit balance of Account 352.

+ Welfare fund (Entry 319)

This entry reflects the remaining welfare fund at the reporting time;

This entry reflects the credit balance of Account 353.

+ Scientific and technological development fund (Entry 320)

This entry reflects the remaining scientific and technological development fund at the reporting time.

This entry reflects the credit balance of Account 356.

c) Equity (Entry 400)

This entry reflects capital owned by shareholders and capital contributors such as capital contributed by owners, share premium, other capital of owners, undistributed after-tax profits, treasury shares, exchange differences.

Entry 400 = Entry 411 + Entry 412 + Entry 413 + Entry 414 + Entry 415 + Entry 416 + Entry 417

- Capital contributions by owners (Entry 411)

This entry reflects total capital contributed by owners to the enterprise in reality (contributed capital according to face value of shares if the enterprise is a joint-stock company) at the reporting time.

An affiliated unit may use this entry to reflect provided capital if the enterprise demands that working capital provided be recorded to Account 411.

This entry reflects the credit balance of Account 4111.

- Share premium (Entry 412)

This entry reflects the joint-stock company’s share premium at the reporting time.

This entry reflects the credit balance of Account 4112. If Account 4112 has a debit balance, negative numbers shall be put in round brackets.

- Other equity (Entry 413)

This entry reflects the value of other equity at the reporting time.

This entry reflects the credit balance of Account 4118.

- Treasury shares (Entry 414)

This entry reflects the value of the joint-stock company’s treasury shares available at the reporting time.

This entry reflects the debit balance of Account 419 where negative numbers are put in round brackets (negative numbers).

- Exchange differences (Entry 415)

In the cases where a foreign currency is used as accounting currency, this entry reflects the exchange differences due to conversion of the financial statement currency into VND.

- Equity funds (Entry 416)

This entry reflects the unused equity funds at the reporting time. This entry reflects the credit balance of Account 418.

- Undistributed after-tax profits (Entry 417)

This entry reflects the undistributed after-tax profit or loss at the reporting time. This entry reflects the credit balance of Account 421. If Account 421 has a debit balance, negative numbers shall be put in round brackets.

- Total capital (Entry 500)

This entry reflects the total capital that creates the enterprise’s assets at the reporting time. Entry 500 = Entry 300 + Entry 400.

2.2.2. For enterprises satisfying the going concern assumption (Form B01a - DNN)

A) Short-term assets (Entry 100)

This entry reflects total value of cash and cash equivalents, short-term financial investments, short-term receivables, inventory and other short-term assets that can be sold or used within an ordinary course of business at the reporting time.

Entry 100 = Entry 110 + Entry 120 + Entry 130 + Entry 140 + Entry 150.

- Cash and cash equivalents (Entry 110)

This entry reflects cash in funds, demand deposits and cash equivalents of the enterprise at the reporting time.

Total balance of Account 111, Account 112, Account 1281 (sub-account: term deposits of up to 3 months) and Account 1288 (sub-account: cash equivalents) shall be recorded to this entry.

While preparing the financial statement, other amounts qualified as cash equivalent in other accounts may be presented in this entry. Cash equivalents may include promissory notes, treasury bills, etc.

Overdue cash equivalents that are not collected must be transferred to appropriate entries.

In analysis of the entries, apart from the cash equivalents in this entry, the amounts with original terms longer than 3 months that are due within less than 03 months from the reporting date and can be easily converted into certain amounts of money without posing risks may be considered cash equivalents.

- Short-term financial investments (Entry 120)

This entry reflects total value of short-term financial investments (minus provision for loss on devaluation of trading securities) including: trading securities, held to maturity investments whose remaining term does not exceed 12 months from the reporting date.

Short-term financial investments reflected in this entry do not include those reflected by Entry 110 and Entry 133.

Entry 120 = Entry 121 + Entry 122 + Entry 123.

+ Trading securities (Entry 121)

This entry reflects securities and other financial instruments held for trading at the reporting time. This entry may include financial instruments that are not securitized such as commercial papers, forward contracts, swap contracts, etc. held for trading.

This entry reflects the debit balance of Account 121.

+ Provision against devaluation of trading securities (Entry 122).

This entry reflects provision against devaluation of trading securities at the reporting time.

This entry reflects the credit balance of Account 2291 in round brackets (negative numbers).

+ Held to maturity short-term investments (Entry 123)

This entry reflects held to maturity investments whose remaining term does not exceed 12 months or an ordinary course of business at the reporting time such as term deposits, bonds, commercial papers and other debt instruments. This entry does not include held to maturity investments reflected by Entry 110 and Entry 133.

This entry reflects the detailed debit balance of Account 1281 and Account 1288.

- Short-term receivables (Entry 130)

This entry reflects total value of short-term receivables that are due within 12 months or an ordinary course of business at the reporting time such as short-term trade receivables, short-term advance payments to sellers, other short-term receivables, unresolved asset losses minus provision for bad debts.

Entry 130 = Entry 131 + Entry 132 + Entry 133 + Entry 134 + Entry 135.

+ Short-term trade receivables (Entry 131)

This entry reflects the total amount receivable from customers that are due within 12 months or an ordinary course of business at the reporting time. This entry reflects the debit balance of Account 131.

+ Short-term advance payments to sellers (Entry 132)

This account reflects advance payments to sellers for goods/services which will be received by the enterprise within 12 months or an ordinary course of business at the reporting time.

This entry shall reflect the debit balance of Account 331.

+ Other short-term receivables (Entry 133)

This entry reflects other receivables that are due within 12 months or an ordinary course of business at the reporting time such as: short-term loans, short-term intra-company receivables other than working capital reflected in Entry 213; payments on behalf of third parties; interests, distributable dividends; deposits, etc. to be collected by the enterprise.

When the superior unit prepares a consolidated financial position statement, other short-term intra-company receivables other than those specified in this Entry shall be offset against other short-term intra-company payables (Entry 415) on financial position statements of the affiliated units.

This entry reflects the detailed debit balance of Accounts 1288, 1368, 1386, 1388, 334, 338 and 141.

+ Unresolved asset losses (Entry 134)

This entry reflects losses of assets for which causes are not identified at the reporting time. This entry shall reflect the debit balance of Account 1381.

+ Provision for short-term doubtful debts (Entry 135)

This entry reflects provision for short-term doubtful debts at the reporting time. This entry reflects the detailed credit balance of Accounts 2293 in round brackets (negative numbers).

- Inventory (Account 140)

This entry reflects current value of inventory serving the enterprise’s business operation (minus provision against devaluation of inventory) at the reporting time.

Entry 140 = Entry 141 + Entry 142.

+ Inventory (Entry 141)

This entry reflects the total value of inventory owned by the enterprise that is circulated within 12 months or an ordinary course of business at the reporting time.

This entry reflects the debit balance of Accounts 151, 152, 153, 154, 155, 156 and 157.

+ Provision against devaluation of inventory (Entry 142)

This entry reflects provision against devaluation of inventory at the reporting time.

This entry reflects the credit balance of Account 2294 in round brackets (negative numbers).

- Other short-term assets (Entry 150)

This entry reflects total value of other short-term assets to be collected or used after 12 months or an ordinary course of business at the reporting time such as deductible VAT and other short-term assets.

Entry 150 = Entry 151 + Entry 152.

+ Deductible VAT (Entry 151)

This entry reflects deductible VAT and refundable VAT at the end of the reporting year.

This entry shall reflect the debit balance of Account 133.

+ Other short-term assets (Entry 152)

This entry reflects other short-term assets to be collected or used within 12 months or an ordinary course of business at the reporting time, including short-term prepaid expenses, taxes and other amounts receivable from the State.

This entry reflects the detailed debit balance of Accounts 242 and 333.

b) Long-term assets (Entry 200)

This entry reflects values of assets not classified as short-term assets. Long-term assets are assets to be collected or used after 12 months from the accounting period such as long-term receivables, fixed assets, investment property, construction in progress, long-term financial investments and other long-term assets.

Entry 200 = Entry 210 + Entry 220 + Entry 230 + Entry 240 + Entry 250 + Entry 260.

- Long-term receivables (Entry 210)

This entry reflects total value of receivables that are due after 12 months or an ordinary course of business at the reporting time such as long-term trade receivables, long-term advance payments to sellers, working capital in affiliated units, other long-term receivables minus provision for long-term bad debts.

Entry 210 = Entry 211 + Entry 212 + Entry 213 + Entry 214 + Entry 215.

+ Long-term trade receivables (Entry 211)

This entry reflects the total amount receivable from customers that are due after 12 months or an ordinary course of business at the reporting time.

This entry reflects the debit balance of Account 131.

+ Long-term advance payments to sellers (Entry 212)

This account reflects advance payments to sellers for goods/services which will be received by the enterprise after 12 months or an ordinary course of business at the reporting time.

This entry shall reflect the debit balance of Account 331.

+ Working capital in affiliated units (Entry 213)

This entry is only presented in the financial position statement of the superior unit to reflect operating capital provided for affiliated units.

When preparing a consolidated financial position statement, this entry shall be offset against Entry 423 (Working capital provided for affiliated units) or Entry 511 (Capital contributions by owners) on financial position statements of affiliated units.

This entry shall reflect the debit balance of Account 1361.

+ Other long-term receivables (Entry 214)

This entry reflects other receivables that are due after 12 months or an ordinary course of business at the reporting time such as: long-term loans, long-term intra-company receivables other than working capital reflected in Entry 213; payments on behalf of third parties; interests, distributable dividends; deposits, etc. to be collected by the enterprise.

When the superior unit prepares a consolidated financial position statement, other long-term intra-company receivables other than those specified in this entry shall be offset against other long-term intra-company payables (Entry 424) on financial position statements of the affiliated units.

This entry reflects the detailed debit balance of Accounts 1288, 1368, 1386, 1388, 334, 338 and 141.

+ Provision for long-term doubtful debts (Entry 215)

This entry reflects provision for long-term doubtful debts at the reporting time.

This entry reflects the detailed credit balance of Accounts 2293 in round brackets (negative numbers).

- Fixed assets (Entry 220)

This entry reflects total value of fixed assets (costs minus accumulated depreciation) at the reporting time.

Entry 220 = Entry 221 + Entry 222.

+ Cost (Entry 221)

This entry reflects total costs of fixed assets at the reporting time.

This entry reflects the debit balance of Account 211.

+ Accumulated depreciation (Entry 222)

This entry reflects accumulated depreciation of fixed assets at the reporting time.

This entry reflects the credit balance of Accounts 2141, 2142, 2143 in round brackets (negative numbers).

- Investment property (Entry 230)

This entry reflects total remaining value of investment property at the reporting time.

Entry 230 = Entry 231 + Entry 232.

+ Cost (Entry 231)

This entry reflects total costs of investment property at the reporting time minus (-) loss on devaluation of investment property held for capital appreciation.

This entry reflects the debit balance of Account 217.

+ Accumulated depreciation (Entry 232)

This entry reflects accumulated depreciation of investment property for lease at the reporting time.

This entry reflects the credit balance of Account 2147 in round brackets (negative numbers).

- Construction in progress (Entry 240)

This entry reflects total value of fixed assets being purchased, investment in capital construction, costs of major repairs of fixed assets that are unfinished or finished but not transferred or put into operation.

This entry reflects the debit balance of Account 241.

- Long-term financial investments (Entry 250)

This entry reflects total value of long-term financial investments (minus provision for impairment of investments in other entities) at the reporting time, such as: Investments in other entities, held to maturity long-term investments that are due after 12 months or an ordinary course of business.

Entry 250 = Entry 251 + Entry 252 + Entry 253.

+ Investment in other entities (Entry 251)

This entry reflects investments in jointly controlled entities and associate companies and other investments.

This entry reflects the detailed debit balance of Account 228.

+ Provision against impairment of investments in other entities (Entry 252)

This entry reflects the provision against impairment of investments in other entities at the time of reporting because the investee makes a loss and the investor is likely to lose capital.

This entry reflects the credit balance of Account 2292 in round brackets (negative numbers).

+ Held to maturity long-term investments (Entry 253)

This entry reflects held to maturity investments that are due after 12 months or an ordinary course of business from the reporting time such as term deposits, bonds, commercial papers and other debt instruments. This entry does not include loan receivables reflected by Entry 214 (“Other long-term receivables).

This entry shall reflect the debit balance of Account 1281 and Account 1288.

- Other long-term assets (Entry 260)

This entry reflects the values of other long-term assets to be collected after 12 months or an ordinary course of business from the reporting time such as long-term prepaid expenses, long-term receivables from the State (if any) not reflected by the entries above.

Enterprises are not required to reclassify long-term prepaid expenses as short-term prepaid expenses.

This entry reflects the detailed debit balance of Accounts 242 and 333.

- Total assets (Entry 300)

This entry reflects total value of the enterprise’s assets at the reporting time, including short-term assets and long-term assets.

Entry 300 = Entry 100 + Entry 200.

c) Liabilities (Entry 400)

This entry reflects total liabilities at the reporting time, including short-term liabilities and long-term liabilities.

Entry 400 = Entry 410 + Entry 420.

- Short-term liabilities (Entry 410)

This entry reflects total value of liabilities that are due within 12 months or an ordinary course of business from the reporting time such as short-term borrowings and finance lease liabilities; short-term trade payables, short-term advance payments by buyers, taxes and payables to the State, payables to employees, other short-term payables, provision for short-term payables, etc.

Entry 410 = Entry 411 + Entry 412 + Entry 413 + Entry 414 + Entry 415 + Entry 416 + Entry 417 + Entry 418.

+ Short-term trade payables (Entry 411)

This entry reflects the total amount payable to sellers that are due within 12 months or an ordinary course of business from the reporting time.

This entry reflects the total credit balance of Account 331.

+ Short-term advance payments by buyers (Entry 412)

This entry reflects advance payments by buyers for goods/services, fixed assets, investment property to be provided by the enterprise within 12 months or an ordinary course of business from the reporting time (excluding prepaid revenues).

This entry reflects the total credit balance of Account 131.

+ Taxes and other payables to the State (Entry 413)

This entry reflects total amounts payable by the enterprise to the State at the reporting time, including taxes, fees, charges and other amounts payable. This entry reflects the total credit balance of Account 333.

+ Payables to employees (Entry 414)

This entry reflects the amounts payable by the enterprise to its employees at the reporting time.

This entry reflects the credit balance of Account 334.

+ Other short-term payables (Entry 415)

This entry reflects other payables that are due within 12 months or an ordinary course of business from the reporting time such as short-term payables, short-term intra-company payables other than working capital provided for affiliated units reflected in Entry 423; short-term unrealized revenues, assets in surplus without identified causes, amounts payable to social insurance authorities, trade union fees, received short-term deposits, etc.

When the superior unit prepares a consolidated financial position statement, short-term intra-company payables in this entry shall be offset against other short-term intra-company receivables (Entry 133) on financial position statements of the affiliated units.

This entry reflects the credit balance of Accounts 335, 3368, 338 and 1388.

+ Short-term borrowings and finance lease liabilities (Entry 416).

This entry reflects total value of the enterprise’s loans taken from banks, other organizations, financial companies and other entities, including loans taken by issuance of bonds, that are due within 12 months or an ordinary course of business from the reporting time.

This entry reflects the credit balance of Account 341.

+ Provision for short-term payables (Entry 417)

This entry reflects the provisions for payables that are due within 12 months or an ordinary course of business from the reporting time i.e. provisions for warranty, accrued expenses for periodic repair of fixed assets, etc. Provisions for payables are usually estimated without certain payment time, values and the enterprise has not received goods/services from suppliers.

This entry reflects the credit balance of Account 352.

+ Welfare fund (Entry 418)

This entry reflects the remaining welfare fund at the reporting time;

This entry reflects the credit balance of Account 353.

- Long-term liabilities (Entry 420)

This entry reflects total value of the enterprise’s long-term liabilities that are due after 12 months or an ordinary course of business from the reporting time such as long-term trade payables, long-term advance payments by buyers, working capital provided for affiliated units, long-term borrowings and finance lease liabilities, provision for long-term payables and development of science and technology fund.

Entry 420 = Entry 421 + Entry 422 + Entry 423 + Entry 424 + Entry 425 + Entry 426 + Entry 427.

+ Long-term trade payables (Entry 421)

This entry reflects the total amount payable to sellers that are due after 12 months or an ordinary course of business from the reporting time.

This entry reflects the total credit balance of Account 331.

+ Long-term advance payments by buyers (Entry 422)

This entry reflects advance payments by buyers for goods/services, fixed assets, investment property to be provided by the enterprise after 12 months or an ordinary course of business from the reporting time (excluding prepaid revenues).

This entry reflects the detailed credit balance of Account 131.

+ Working capital provided for affiliated units (Entry 423)

Depending on the enterprise’s management model, it shall request its affiliated units to record capital it provides to this entry or Entry 511 (Capital contributed by owners).

This Entry is only presented on financial position statements of affiliated units and reflects the amounts payable by affiliated units to the superior unit in terms of working capital

When the superior unit prepares a consolidated financial position statement, this entry shall be offset against Entry 213 in the financial position statement of the superior unit.

This entry reflects the detailed credit balance of Account 3361.

+ Other long-term payables (Entry 424)

This entry reflects other payables that are due after 12 months or an ordinary course of business from the reporting time such as costs payable, intra-company payables other than working capital provided for affiliated units, long-term unrealized revenues, long-term deposits received, etc.

When the superior unit prepares a consolidated financial position statement, other long-term intra-company receivables other than those specified in this entry shall be offset against other long-term intra-company payables (Entry 214) on financial position statements of the affiliated units.

This entry reflects the credit balance of Accounts 335, 3368, 338 and 1388.

+ Long-term borrowings and finance lease liabilities (Entry 425).

This entry reflects the enterprise’s loans taken from banks, other organizations, financial companies and other entities, value of preference shares at face value that the issuer has to repurchase at certain time in the future that are due after 12 months or an ordinary course of business from the reporting time such as loans taken from banks or financial institutions, payables related to finance lease fixed assets, etc.

This entry reflects the detailed credit balance of Accounts 341 and 4111 (sub-account: preferred shares classified as liabilities).

+ Provision for long-term payables (Entry 426)

This entry reflects the provisions for payables that are due after 12 months or an ordinary course of business from the reporting time i.e. provisions for warranty, provision for restructuring, accrued expenses for periodic repair of fixed assets, etc. Provisions for payables are usually estimated without certain payment time, values and the enterprise has not received goods/services from suppliers.

This entry reflects the credit balance of Account 352.

+ Scientific and technological development fund (Entry 427)

This entry reflects the remaining scientific and technological development fund at the reporting time.

This entry reflects the credit balance of Account 356.

d) Equity (Entry 500)

This entry reflects capital owned by shareholders and capital contributors such as capital contributed by owners, share premium, other equity, undistributed post-tax profits, treasury shares, exchange differences.

Entry 500 = Entry 511 + Entry 512 + Entry 513 + Entry 514 + Entry 515 + Entry 516 + Entry 517

- Capital contributions by owners (Entry 511)

This entry reflects total capital contributed by owners to the enterprise in reality (contributed capital according to face value of shares if the enterprise is a joint-stock company) at the reporting time.

An affiliated unit may use this entry to reflect provided capital if the enterprise demands that working capital provided be recorded to Account 411.

This entry reflects the credit balance of Account 4111.

- Share premium (Entry 512)

This entry reflects the joint-stock company’s share premium at the reporting time.

This entry reflects the credit balance of Account 4112. If Account 4112 has a debit balance, negative numbers shall be put in round brackets.

- Other equity (Entry 513)

This entry reflects the value of other equity at the reporting time.

This entry reflects the credit balance of Account 4118.

- Treasury shares (Entry 514)

This entry reflects the value of the joint-stock company’s treasury shares available at the reporting time.

This entry reflects the debit balance of Account 419 in round brackets (negative numbers).

- Exchange differences (Entry 515)

In the cases where a foreign currency is used as accounting currency, this entry reflects the exchange differences due to conversion of the financial statement currency into VND.

- Equity funds (Entry 516)

This entry reflects the unused equity funds at the reporting time.

This entry reflects the credit balance of Account 418.

- Undistributed post-tax profits (517)

This entry reflects the undistributed after-tax profit or loss at the reporting time.

This entry reflects the credit balance of Account 421. If Account 421 has a debit balance, negative numbers shall be put in round brackets.

- Total capital (Entry 600)

This entry reflects the total capital that creates the enterprise’s assets at the reporting time.

Entry 600 = Entry 400 + Entry 500.

2.2.3. For enterprises not satisfying the going concern assumption (Form B01 - DNNKLT)

The financial position statement of an enterprise that does not satisfy the going concern assumption is similar to that of an enterprise that satisfies the going concern assumption except the following entries:

- Financial investments (Entry 120)

This entry reflects total financial investments at the reporting time, including: trading securities, held to maturity investments and investments in other entities.

Financial investments reflected in this entry does not include those reflected by Entry 110 and collected debts reflected by Entry 134 (Other receivables).

Entry 120 = Entry 121 + Entry 122 + Entry 123.

- Receivables (Entry 130)

This entry reflects all receivables at the reporting time such as trade receivables, advance payments to sellers, capital in affiliates, other receivables, unresolved asset losses.

Entry 130 = Entry 131 + Entry 132 + Entry 133 + Entry 134 + Entry 135.

- Inventory (Account 140)

This entry reflects total value of inventory under the enterprise’s ownership at the reporting time.

This entry reflects the debit balance of Accounts 151, 152, 153, 154, 155, 156 and 157.

- Fixed assets and investment property (Entry 150)

This entry reflects total remaining value (costs minus accumulated depreciation) of fixed assets and investment property at the reporting time.

This entry reflects the debit balance of Accounts 211 and 217 minus (-) the credit balance of Account 214.

2.3. Guidance on preparation of the income statement (Form B02 - DNN)

2.3.1. Contents

a) An income statement reflects the enterprise’s business status and performance, including outcomes of the enterprise’s primary business operations, financing activities and other operations.

b) An income statement consists of 5 columns:

- Column 1: Indicators;

- Column 2: Codes;

- Column 3: Corresponding codes on notes to financial statement;

- Column 4: Amounts occurring in the accounting period;

- Column 5: Previous year’s data (for comparison).

2.3.2. Basis for income statement

- The previous year income statement.

- The general accounting books and specific accounting books for accounts from 5 to 9.

2.3.3. Contents of the income statement:

- Revenues from goods sale and service provision (Entry 01)

This entry reflects total revenue from selling goods, finished products, investment property, providing services and other revenues earned in the reporting year. This entry reflects the accumulated value on the credit side of Account 511.

When the superior unit prepares a consolidated income statement, revenues from goods sale and service provision derived from intra-company transactions must be excluded.

This entry does not include indirect taxes such as VAT (including VAT paid directly), special excise tax, export duty, environmental protection tax and other indirect taxes.

- Revenue deductions (Entry 02)

This entry reflects deductions from the total revenue from goods sale and service provision in the year, including: discounts, goods returned in the accounting period. This entry reflects Dr 511 and Cr 111, Cr 112 and Cr 131 in the accounting period.

This entry does not include indirect taxes and fees that are not retained by the enterprise and have to be transferred to state budget (recorded as decreases in revenue in Account 511) because they are collected on behalf of the State.

- Net revenues from goods sale and service provision (Entry 10)

This entry reflects revenues from the sale of goods, finished products, investment property, service provision and other revenues minus (-) deductions (discounts, goods returned) in the accounting period, which is the basis for determination of the enterprise’s performance.

Entry 10 = Entry 01 - Entry 02.

- Costs of goods sold (Entry 11)

This entry reflects total cost of goods, investment property, finished products sold and services rendered, and other expenses included in cost or recorded as decreases in cost of goods sold in the accounting period.

This entry reflects the amounts recorded to the credit side of Account 632 and debit side of Account 911.

When the superior unit prepares a consolidated income statement, cost of goods sold derived from intra-company transactions must be excluded.

- Gross profit on goods sale and service provision (Entry 20)

This entry reflects the difference between foreign currency revenue from selling goods, finished products, investment property, providing services and cost of goods sold in the accounting period. Negative numbers shall be put in round brackets.

Entry 20 = Entry 10 - Entry 11.

- Financial income (Entry 21)

This entry reflects financial income earned in the accounting period.

This entry reflects the amounts recorded to the debit side of Account 515 and credit side of Account 911.

When the superior unit prepares a consolidated income statement, financial incomes derived from intra-company transactions must be excluded.

- Financial expenses (Entry 22)

This entry reflects total financial expenses, including loan interests payable, expenses related to copyright license, jointly controlled entity expenses, etc. incurred in the accounting period.

This entry reflects the amounts recorded to the credit side of Account 635 and debit side of Account 911.

When the superior unit prepares a consolidated income statement, financial expenses derived from intra-company transactions must be excluded.

- Interest expense (Entry 23)

This entry reflects interest expense included in financial expense of the accounting period.

This entry is recorded on the basis of interest expense in Account 635.

- Administrative expense (Entry 24)

This entry reflects the total administration expenses incurred in the period.

This entry reflects the amounts recorded to the credit side of Account 642 and debit side of Account 911 in the accounting period.

- Net profit on business operation (Entry 30)

This entry reflects the enterprise’s business performance in the accounting period. This entry equals (=) profit from goods sale and service provision plus financial income minus (-) financial expense and administrative expense incurred in the accounting period. Negative numbers shall be put in round brackets.

Entry 30 = Entry 20 + Entry 21 - Entry 22 - Entry 24.

- Other incomes (Entry 31)

This entry reflects other incomes earned in the accounting period. This entry is recorded according to the debit side of Account 711 (excluding other incomes from liquidation or sale of fixed assets) and the credit side of Account 911.

Regarding liquidation and sale of fixed assets, the positive difference between the proceeds from the liquidation or sale and remaining value of the fixed assets shall be recorded to this entry.

When the superior unit prepares a consolidated income statement, other incomes derived from intra-company transactions must be excluded.

- Other expenses (Entry 32)

This entry reflects other expenses incurred in the accounting period. This entry is recorded according to the credit side of Account 811 "Other expenses” (excluding other expenses of liquidation or sale of fixed assets) and the debit side of Account 911.

Regarding liquidation and sale of fixed assets, the negative difference between the proceeds from the liquidation or sale and remaining value of the fixed assets shall be recorded to this entry.

When the superior unit prepares a consolidated income statement, other expenses derived from intra-company transactions must be removed.

- Other profits (Entry 40)

This entry reflects the difference between other incomes earned (excluding VAT paid directly) and other expenses incurred in the accounting period. Negative numbers shall be put in round brackets.

Entry 40 = Entry 31 - Entry 32.

- Total pre-tax accounting profits (Entry 50)

This entry reflects total accounting profit in the year before deducting corporate income tax incurred in the accounting period. If the net revenue is smaller than cost of goods sold, the difference (negative) shall be put in round brackets. Negative numbers shall be put in round brackets.

Entry 50 = Entry 30 + Entry 40.

- Corporate income tax (Entry 51)

This entry reflects corporate income tax incurred in the year. This entry is recorded according to the credit side of Account 821 and debit side of Account 911, or debit side of Account 821 and credit side of Account 911, in which case negative numbers shall be put in round brackets.

- Post-tax profit (Entry 60)

This entry reflects total net profit (or loss) of the year after corporate income tax is paid. Negative numbers shall be put in round brackets.

Entry 60 = Entry 50 - Entry 51.

2.4. Guidance on preparation of cash flow statement (Form B03 - DNN)

2.4.1. Rules for preparing and presenting a cash flow statement

2.4.1.1. The cash flow statement is optional. Instructions on preparing the cash flow statement are based on most common transactions. Enterprises shall present their cash flows in a manner that is most suitable for transactions that are not mentioned in the instructions.

2.4.1.2. A short-term investment is only considered cash equivalents on the cash flow statement if it is due within 3 months from the day on which it is purchased and can be easily converted into a certain amount of cash without posing risks thereto. Example: Exchange bills, treasury bills, deposit certificates, etc. that are due within 03 months from the purchase date.

2.4.1.3. Enterprises shall classify cash flows on the cash flow statement according to: operating activities, investing activities, and financing activities:

- Cash flows from operating activities are those derived from the enterprise’s primary business operations and activities other than investing activities or financing activities;

- Cash flows from investing activities are those derived from purchase, development, liquidation, sale of fixed assets, investment property, other long-term assets, grant of loans, investment in other entities and other investments not classified as cash equivalents.

- Cash flows from financing activities are those derived from operations that lead to changes to the enterprise’s scale and ratios of the enterprise’s equity and loan capital.

2.4.1.4. Enterprises may classify cash flows from operating activities, investing activities, and financing activities in a manner that is most suitable for its operation.

2.4.1.5. Cash flows from operating activities, investing activities, and financing activities shall be recorded according to:

- Collection and payment of money on behalf of customers; payment on behalf of asset owners;

- Collection and payment of short-term amounts such as: foreign currency trading, stake trading, other short-term loans that are due within 3 months.

2.4.1.6. Cash flows from transactions in foreign currencies shall be converted into the accounting currency and included in the financial statement at the actual exchange rates applied on the transaction dates.

2.4.1.7. Investment and financial transactions that do not use cash or cash equivalents shall not be included in the cash flow statement. Example:

- Purchase of assets by undertaking debts, whether directly or via finance lease;

- Conversion of debts into equity.

2.4.1.8. Opening and closing cash and cash equivalents, impacts of fluctuation of exchange rates on cash and cash equivalents in foreign currencies shall be separately presented on the cash flow statement for comparison with the financial position statement.

2.4.1.9. The enterprise shall present and provide explanation for the cash and cash equivalents with high closing balance that are held by the enterprise but cannot be used because of legal restrictions or other restrictions with which the enterprise must comply.

2.4.1.10. In the cases where the enterprise takes a loan to directly pay the contractor or supplier (the loan is directly transferred by the lender the contractor or supplier without being transferred to the enterprise’s account), the enterprise must include it on the cash flow statement. To be specific:

- The loan shall be presented as an inflow from financing activities;

- The amount paid to the contractor or supplier shall be presented as an outflow from operating activities or investing activities as the case may be.

2.4.1.11. In the cases where the enterprise carry out offsetting:

- If transactions of the same cash flows are offset against each other, they shall be presented as net amounts.

- If transactions of the different cash flows are offset against each other, they shall be presented separately.

2.4.2. Basis for preparation of cash flow statement

A cash flow statement shall be prepared according to:

- The financial position statement;

- The income statement;

- The notes to financial statement;

- The previous period’s cash flow statement;

- Other accounting documents such as general accounting books, specific accounting books, fixed asset depreciation sheet, etc.

2.4.3. Accounting books serving preparation of cash flow statement

- Accounting books specifying accounts payable, accounts receivable and inventory must be able to classify the cash flows into operating activities, investing activities and financing activities. Example: Debt payment to a contractor related to capital construction is classified as a cash flow from investing activities; Payment of debt to a supplier of goods/services serving the enterprise’s business operation is classified as a cash flow from operating activities.

- In accounting books, cash accounts must be detailed to classify cash flows according to operating activities, investing activities, and financing activities. Example: Regarding payment of a bank loan principal and interest, the interest shall be classified as a cash flow from operating activities and the principal as a cash flow from financing activities.

- At the end of the fiscal year when the cash flow statement is prepared, short-term investments that are due within 3 months from the purchase date and qualified as cash equivalents shall be identified and excluded from cash flows from investing activities. Values of cash equivalents shall be recorded to “Closing cash and cash equivalents” on the cash flow statement.

2.4.4. Method for preparing the cash flow statement

2.4.4.1. Statement of cash flows from operating activities

Cash flows from operating activities are inflows and outflows from business operations in the period, including those related to held for trading securities.

Cash flows from operating activities shall be recorded directly or indirectly.

2.4.4.1.1. Direct statement of cash flows from operating activities (Form B03 - DNN)

a) Statement rules:

With the direct method, cash inflows and outflows from operating activities shall be identified and presented in the cash flow statement by analyzing and consolidating revenues and expenditures from the enterprise’s accounting books.

b) Specific rules:

- Revenues from goods sale, service provision and other revenues (Entry 01)

This entry is recorded according to the total revenue collected (total amounts payable) in the period from sale of goods, service provision, copyright license, commissions and other revenues (such as sale of trading securities), including collected debts related to goods sale, service provision and other revenues earned in previous periods and collected in this period plus (+) advance payments from buyers.

This entry does not include revenues from liquidation, sale of fixed assets, investment property and other long-term assets, recovered loans and investments in other entities, collected loan interests, dividends, distributed profits and other revenues classified as cash flows from investing activities; revenues from taking loans, issuance of shares, receipt of capital contributions from owners shall be classified as cash flows from financing activities.

This entry is recorded according to Accounts 111 and 112, accounts receivable in accounting books after comparison with Accounts 511 and 131 or Accounts 515 and 121 (revenues from selling trading securities).

- Payments to suppliers (Entry 02)

This entry is recorded according to the total amount paid in the period for goods, services, payments of operating expenses, including payment for trading securities, debt payments or advance payments to sellers.

This entry does not include expenditures on purchase of fixed assets, investment property (including materials for capital construction), loans granted, investments to other entities and other expenditures classified as cash flows from investing activities; repayment of borrowings and finance lease liabilities, return of capital to owners, dividends and profits given to owners, and other expenditures classified as cash flows from financing activities.

This entry is recorded according to Accounts 111 and 112, accounting books, accounts receivable and loans accounts (loans or collected debts used for paying debts) after comparison with Account 311 and inventory accounts. This entry consists of negative numbers in round brackets.

- Payments to employees (Entry 03)

This entry is recorded according to the total payments to employees in the accounting period, including salaries, allowances, bonuses, etc. that are paid or advanced by the enterprise.

This entry is recorded according to Accounts 111 and 112 (payables to employees) after comparison with Account 334 (cash payments) in the accounting period. This entry consists of negative numbers in round brackets.

- Paid loan interests (Entry 04)

This entry reflects the total loan interests paid in the accounting period, including interests generated and paid within the current period, interests accrued in the previous periods and paid in the current period.

This entry does not include paid interests that are capitalized as work in progress and classified as cash flows from investing activities. If the loan interests paid in the period are both capitalized and aggregated with financial expense, accountants shall determine the paid interests of the cash flows from operating activities and investing activities according to the capitalization ratio of the accounting period.

This entry is recorded according to Accounts 111 and 112 (interest payment), accounts receivable (interest payments from receivables) after comparison with Accounts 335, 635, 242 and relevant accounts. This entry consists of negative numbers in round brackets.

- Paid corporate income tax (Entry 05)

This entry reflects the total corporate income tax paid to the State in the accounting period, including corporate income tax incurred and paid this period, corporate income tax incurred in previous periods and paid in this period, and prepaid corporate income tax (if any).

This entry is recorded according to Accounts 111 and 112 (corporate income tax) after comparison with Account 3334 in the accounting period.

- Other revenues from operating activities (Entry 06)

This entry reflects revenues from operating activities other than those reflected in Entry 01, such as: other incomes (damages, fines, bonuses and other payments, etc.); refunded tax; received deposits; redeemed deposits; rewards and assistance by external entities, etc.

This account is recorded according to Accounts 111 and 112 after comparison with Accounts 711, 133, 141, 138 and relevant accounts in the accounting period.

- Other expenditures on operating activities (Entry 07)

This entry reflects expenditures on business operation other than those reflected by Entries 02, 03, 04, 05, such as: damages, fines, taxes (excluding corporate income tax); fees and charges, land levies, social insurance, health insurance, unemployment insurance premiums, trade union fees, paid deposits, returned deposits, expenditures from provisions; expenditures from welfare fund, development of science and technology fund and other funds, etc.

This account is recorded according to Accounts 111 and 112 after comparison with Accounts 811, 138, 333, 338, 352, 353, 356 and relevant accounts. This entry consists of negative numbers in round brackets.

- Net cash flows from operating activities (Entry 20)

This Entry reflects the difference between revenues and expenditures from operating activities in the accounting period. This entry is the total of Entries from 01 to 07. If the result is a negative number, it will be put in round brackets.

Entry 20 = Entry 01 + Entry 02 + Entry 03 + Entry 04 + Entry 05 + Entry 06 + Entry 07.

2.4.4.1.2. Indirect statement of cash flows from operating activities (Form B03 - DNN)

a. Statement rules:

With the indirect rules, the cash inflows and outflows are determined by ensuring that profit before corporate income tax is paid is not affect by non-cash items, changes in the period to inventory, receivables, payables and other amounts affected by cash flows from investing activities, including:

- Non-cash expenses such as depreciation of fixed assets, real estate, provisions, etc.

- Non-cash profits and losses such as profits and losses on exchange differences, contribution of non-monetary assets as capital;

- Profits and losses classified as cash flows from investing activities such as profits and losses on liquidation, sale of fixed assets and investment property, loan interests, deposit interests, dividends and distributed profits, etc.;

- Interest expense recorded in the income statement of the current period.

- Cash flows from operating activities are adjusted according to changes to working capital, prepaid expenses, other revenues and expenditures such as:

+ Changes in the accounting period to inventory, receivables, payables from operating activities (except loan interests payable and corporate income tax payable);

+ Changes to prepaid expenses;

+ Changes to trading securities;

+ Loan interests paid;

+ Corporate income tax paid;

+ Other revenues from operating activities;

+ Other expenditures from operating activities.

b) Specific rules:

- Pre-tax profits (Entry 01)

This entry derives from Entry 50 (Total pre-tax accounting profit) on the income statement of the same accounting period. Negative numbers shall be put in round brackets.

- Adjustments (Entry 02)

Entry 02 = Entry 03 + Entry 04 + Entry 05 + Entry 06 + Entry 07 + Entry 08.

+ Depreciation of fixed assets and investment property (Entry 03)

(+) If the enterprise is able to separate depreciation of inventory and depreciation included in the income statement, this entry only comprises the depreciation included in income statement; “Increases and decreases in inventory” entry does not include depreciation of closing inventory (not sold in the period);

(+) If the enterprise is not able to separate depreciation of inventory and depreciation included in the income statement, this entry comprises the depreciation included in income statement plus (+) depreciation of inventory; “Increases and decreases in inventory” entry includes depreciation of closing inventory (not sold in the period).

In every case, the enterprise must remove from the cash flow statement the depreciation of construction in progress, depreciation recorded as decrease in the welfare fund that has been used to create fixed assets, decrease in the development of science and technology fund that has been used to create fix assets. This entry may be aggregated with “Pretax profit”.

+ Provisions (Entry 04)

This entry reflects the impact of provisions on cash flows of the accounting period. This entry is recorded according to the difference between the opening balance and closing balance of provisions against impairment of assets (provision against devaluation of trading securities; provisions against impairment of investments in other entities, provisions against devaluation of inventory, allowance for bad debts) and provisions for payables on the financial statement.

This entry may be aggregated with “Pretax profit” if the closing balance of provisions is greater than the opening balance, or may be deducted from “Pretax profit” if the closing balance of provisions is smaller than the opening balance and put in round brackets.

+ Profit/loss on exchange difference due to reassessment of foreign currency monetary items (Entry 05)

This entry reflects profit or loss on exchange difference due to reassessment of foreign currency monetary items which have been aggregated with pretax profit in the accounting period. This entry is recorded according to the difference between the credit balance and debit balance of Account 413 after comparison with Account 515 (interest on reassessment of foreign currency monetary items) or Account 635 (loss on reassessment of foreign currency monetary items).

This entry may be deducted from “Pretax profit” if there is a profit on exchange difference, or may be aggregated with “pretax profit” if there is a loss on exchange difference.

+ Profit/loss on investing activities (Entry 06)

This entry reflects the total profit made or loss incurred in the period which have been aggregated with pretax profit but classified as cash flows from investing activities, including:

(+) Profit, loss on liquidation, sale of fixed assets, investment property and impairment of investment property held for capital appreciation;

(+) Profit, loss due to reassessment of non-monetary assets contributed as capital in other entities;

(+) Profit, loss on sale, withdrawal of financial investments (excluding profit and loss on trading securities), such as: investments in jointly controlled entities or associate companies; held to maturity investments;

(+) Losses or reversed losses on held to maturity investments;

(+) Loan interests, deposit interests, dividends and profits receivables.

This account is recorded according to Accounts 515, 711, 632, 635, 811 and relevant accounts (interest or loss classified as cash flow from investing activities).

This entry may be deducted from “Pretax profit” if there is a net profit on investing activities and put in round brackets (negative number), or may be aggregated with “Pretax profit” if there is a net loss on investing activities.

+ Interest expense (Entry 07)

This entry reflects interest expense recorded in the income statement of the period. This entry is recorded according to Accounts 635 (loan interest incurred in the period) after comparison with “Interest expense” in the income statement.

This entry may be aggregated with “Pretax profit.

+ Other adjustments (Entry 08)

This entry reflects contributions to and withdrawals from the scientific and technological development fund in the period. This entry is recorded according to Account 356.

This entry may be aggregated with “Pretax profit” if contributions are made in the period, or may be deducted from “pretax profit” withdrawals are made in the period.

- Profit from operating activities before working capital is changed (Entry 09)

Entry 09 = Entry 10 + Entry 11 + Entry 12 + Entry 13 + Entry 14 + Entry 15 + Entry 16 + Entry 17 + Entry 18

+ Increases and decreases in receivables (Entry 10)

This entry reflects the total difference between the closing balance and opening balance of accounts receivable (amounts related to business operation), such as Accounts 131, 136, 138, 133, 141, 331 (Prepayments to sellers).

This entry does not include the receivables related to investing activities such as: advance payments to construction contractors; loan principal and interest receivable; deposit interest, dividends and distributed profits receivable; receivables from liquidation of fixed assets, investment property and financial investments; value of pledged fixed assets, etc.

This entry may be aggregated with “Profit from operating activities before working capital is changed” if the closing balance is smaller than the opening balance. This entry may be deducted from “Profit from operating activities before working capital is changed” if the closing balance is greater than the opening balance and put in round brackets (negative number).

+ Increases and decreases in inventory (Entry 11)

This entry reflects the difference the closing balance and opening balance of inventory accounts (excluding provision against devaluation of inventory, inventory used for capital construction or exchange with fixed assets or investment property; experimental production expenses included in costs of fixed assets derived from capital construction). Inventory without identified purposes (for operating activities or capital construction) shall be included in this entry.

If the enterprise is able to separate depreciation of fixed assets in inventory and depreciation included in the income statement (“Depreciation of fixed assets and investment property” – Entry 03 only consists of depreciation of fixed assets included in the income statement), this entry does not include depreciation of fixed assets in closing inventory (not sold in the period);

If the enterprise is not able to separate depreciation of fixed assets in inventory and depreciation included in the income statement (“Depreciation of fixed assets and investment property” – Entry 03 includes depreciation of fixed assets related to inventory), this entry does not include depreciation of fixed assets in closing inventory (not sold in the period).

This entry may be aggregated with “Profit from operating activities before working capital is changed” if the closing balance is smaller than the opening balance. This entry may be deducted from “Profit from operating activities before working capital is changed” if the closing balance is greater than the opening balance and put in round brackets (negative number).

+ Increases and decreases in payables (excluding loan interests and corporate income tax payable) (Entry 12)

This entry reflects total difference between the closing balance and opening balance of payables related to business operation, such as Accounts 331, 333, 334, 335, 336, 338, 131 (prepayments by buyers).

This entry does not include corporate income tax payable (Cr 3334) and loan interest payable (Cr 335).

This entry does not include payables related to investing activities, such as: advance payments by buyers related to liquidation of fixed assets or investment property; payables related to purchases, development of fixed assets and investment property; payments for equity instruments, debt instruments, and payables related to financing activities such as principals of borrowings, finance lease liabilities, dividends and profits payable.

This entry may be aggregated with “Profit from operating activities before working capital is changed” if the closing balance is greater than the opening balance. This entry may be deducted from “Profit from operating activities before working capital is changed” if the closing balance is smaller than the opening balance and put in round brackets (negative number).

+ Increases and decreases in prepaid expenses (Entry 13)

This entry reflects total difference between the closing balance and opening balance of Account 242 (“Prepaid expenses”) excluding those related to cash flows from investing activities, such as: land rents not qualified as intangible fixed assets and capitalized prepaid loan interest.

This entry may be aggregated with “Profit from operating activities before working capital is changed” if the closing balance is smaller than the opening balance. This entry may be deducted from “Profit from operating activities before working capital is changed” if the closing balance is greater than the opening balance and put in round brackets (negative number).

+ Increases and decreases in trading securities (Entry 14)

This entry is recorded according to total difference between the closing balance and opening balance of Account 121 (“Trading securities”) in the accounting period.

This entry may be aggregated with “Profit from operating activities before working capital is changed” if the closing balance is smaller than the opening balance. This entry may be deducted from “Profit from operating activities before working capital is changed” if the closing balance is greater than the opening balance and put in round brackets (negative number).

+ Paid loan interests (Entry 15)

This entry reflects the total loan interests paid in the accounting period, including interests generated and paid within the current period, interests accrued in the previous periods and paid in the current period.

This entry does not include paid interest that has been capitalized as work in progress and classified as cash flows from investing activities. If the loan interest paid in the period is both capitalized and aggregated with financial expense, accountants shall determine the paid interest of the cash flows from operating activities and investing activities according to the capitalization ratio of the accounting period.

This entry is recorded according to Accounts 111 and 112 (loan interests), accounts receivable (payment of loan interest from receivables) after comparison with Accounts 335, 635, 242 and relevant accounts.

This entry may be deducted from “Profit on business operation before working capital is changed” and put in round brackets (negative number).

+ Paid corporate income tax (Entry 16)

This entry reflects the total corporate income tax paid to the State in the accounting period, including corporate income tax incurred and paid this period, corporate income tax incurred in previous periods and paid in this period, and prepaid corporate income tax (if any).

This entry is recorded according to Accounts 111 and 112 (corporate income tax) after comparison with Account 3334 in the accounting period and may be deducted from “Profit before working capital is changed” in round brackets (negative number).

+ Other receivables from operating activities (Entry 17)

This entry reflects receivables from operating activities other than those mentioned in entries from 01 to 15 such as: rewards from external entities, contributions to the enterprise’s funds, etc.

This entry is recorded according to Accounts 111 and 112 after comparison with relevant accounts in the accounting period. This entry may be aggregated with “Profit from operating activities before working capital is changed”.

+ Other expenditures on operating activities (Entry 18)

This entry reflects expenditures on operating activities other than those mentioned in entries from 01 to 15 such as: withdrawals from the welfare fund, scientific and technological development fund; benefits for employees, etc.

This entry is recorded according to Accounts 111 and 112 after comparison with relevant accounts in the accounting period. This entry may be deducted from “Profit from operating activities before working capital is changed”.

- Net cash flows from operating activities (Entry 20)

This Entry reflects the difference between revenues and expenditures from operating activities in the accounting period. Negative numbers shall be put in round brackets.

Entry 20 = Entry 01 + Entry 02 + Entry 09.

2.4.4.2. Statement of cash flows from investing activities

a) Statement rules:

- Cash inflows and outflows from investing activities shall be separately presented on the cash flow statement.

- Cash flows from investing activities shall be stated according to direct method or adjustable direct method.

b) Specific rules (see From B03 - DNN)

- Expenditures on purchases, development of fixed assets, investment property and other long-term assets (Entry 21)

This entry reflects the total expenditures on purchases, development of fixed assets, investment property, intangible fixed assets, expenditures capitalized as intangible fixed assets, construction in progress and real estate in the accounting period. Experimental production expense after being offset against the revenue from products thereof shall be aggregated with this entry (if expense if greater than revenue) or deducted from this entry (if revenue is greater than expense).

This entry also reflects the payments for raw materials, assets used for capital construction that have not been used for capital construction at the end of the period; advance payments to construction contractors but the works have not been transferred; payments to sellers in the period related to purchases and investment in capital construction.

In the cases where purchased raw materials or assets are used for both business operation and capital construction but the value of raw materials and assets for capital construction or business operation cannot be identified, the payments shall be recorded to cash flows from operating activities.

This entry does not include finance lease liabilities and value of other non-monetary assets used as payment for purchases of fixed assets, investment property, capital construction; increases in value of fixed assets, investment property and capital construction in the period that have not been paid for in cash.

This entry is recorded according to Accounts 111, 112 (expenditure on purchases, construction of fixed assets, investment property and other long-term assets, including capitalized loan interest), 3411 (loan amount paid to sellers), 331 (advance payment or payment of debts to capital construction contractors, sellers of fixed assets and investment property) after comparison with accounts 211, 217, 241 in the accounting period. This entry consists of negative numbers in round brackets.

- Revenues from liquidation, sale of fixed assets, investment property and other long-term assets (Entry 22)

This entry reflects the net revenue from liquidation and sale of tangible fixed assets, intangible fixed assets and investment property in the accounting period, including collected debts related to such liquidation or sale.

This entry does not include revenues in the form of non-monetary assets or unrealized revenues from liquidation or sale of fixed assets, investment property and other long-term assets; does not include non-monetary expenses related to liquidation or sale of fixed assets, investment property and remaining value of fixed assets and investment property contributed as capital in jointly controlled entities and associate companies or losses.

This entry reflects the difference between the revenue from and expenditure on liquidation or sale of fixed assets, investment property and other long-term assets. The revenue is obtained from Account 111, 112 after comparison with Account 711, 5118, 131 (proceeds from liquidation and sale of fixed assets, investment property and other long-term assets) in the period. The expenditure is obtained from Account 111, 112 after comparison with Account 632 and 811 (liquidation and sale of fixed assets and investment property) in the period. This entry consists of negative numbers in round brackets if the revenue is smaller than expenditure.

- Granted loans and contributed capital in other entities (Entry 23)

This entry reflects the total bank deposit that is due after 3 months, loans granted to other entities, payments for debt instruments of other entities (bonds, commercial papers, preferred shares classified as liabilities, etc.), contributed capital in other entities (including payments for voting common shares and preference shares classified as equity; capital contributed to jointly controlled entities and associate companies, etc.) that are held to maturity.

This entry does not include payments for debt instruments classified as cash equivalents and payments for debt instruments held for trading (to ear profit on difference between buying price and selling price); granted loans, debt instruments paid with non-monetary assets or refinance; payments for shares held for trading; payments for preferred shares classified as liabilities; non-monetary assets invested in other entities; investments in the form of bond or shares issuance; conversion of debt instruments into capital contributions or outstanding debts.

This entry is obtained from Accounts 111, 112 after comparison with Accounts 128, 228, 331 in the accounting period. This entry consists of negative numbers in round brackets.

- Recovered loans and capital contributed in other entities (Entry 24)

This entry reflects the total withdrawn bank deposit that is due after 3 months, recovered loan principals, bond principal, preferred shares classified as liabilities and debt instruments of other entities; total amount obtained from sale or liquidation of stakes in other entities (including payments for sale of equity instruments receivable in previous periods) in the accounting period.

This entry does not include the revenues from selling debt instruments classified as cash equivalents and selling debt instruments classified as held for trading securities); revenues in the form of non-monetary assets or conversion of debt instruments into capital instruments of other entities, revenues from selling trading securities; value of recovered investments in the form of non-monetary assets, debt instruments or capital instruments of other entities or have not been paid with cash.

This entry is obtained from Accounts 111, 112 after comparison with Accounts 128, 228, 131 in the accounting period.

- Collected loan interests, dividends and distributed profits (Entry 25)

This entry reflects collected loan interests, deposit interests, bond interests, dividends and profits from investments in other entities in the accounting period. This entry does not include profits and dividends received in the form of shares or non-monetary assets.

This entry is obtained from Accounts 111, 112 after comparison with Account 515.

- Net cash flows from investing activities (Entry 30)

This entry reflects the difference between the total revenue from and total expenditure on investing activities in the accounting period. Negative numbers shall be put in round brackets.

Entry 30 = Entry 21 + Entry 22 + Entry 23 + Entry 24 + Entry 25.

2.4.4.3. Statement of cash flows from financing activities

a. Statement rules:

Cash inflows and outflows from financing activities shall be separately presented on the cash flow statement, unless they are recorded as net cash flows.

b) Specific rules (see From B03-DNN)

- Revenue from issuance of shares, capital contributed by owners (Entry 31)

This entry reflects the total amount collected from the enterprise’s owners who contribute capital in the accounting period. This entry does not include loans and debts converted into capital, undistributed post-tax profits converted into capital contribution (including dividends paid with shares) or capital contribution in the form of non-monetary assets.

In a joint-stock company, this entry reflects the revenue from issuance of common shares at issuance price, including revenue from issuance of preferred shares classified as equity, and does not include revenue from issuance of preferred shares classified as liabilities.

This entry is obtained from Accounts 111, 112 after comparison with Account 411 in the accounting period.

- Capital returned to owners, repurchased shares issued by the enterprise (Entry 32)

This entry reflects the total capital contribution returned to the enterprise’s owners in cash or in the form of repurchasing shares issued by the enterprise in cash for destruction or as treasury shares in the accounting period.

This entry does not returned preferred shares classified as liabilities, owners’ capital contributions in the form of non-monetary assets or use of capital to cover loss.

This entry is obtained from Accounts 111, 112 after comparison with Accounts 411 and 419 in the accounting period. This entry consists of negative numbers in round brackets.

- Revenues from loans (Entry 33)

This entry reflects the total revenue from the enterprise’s borrowing process, including issuance of bonds of financial institutions and credit institutions and other entities in the accounting period. This entry does not include the loans in the form of non-monetary assets or finance lease liabilities.

In case of issuance of preferred shares, this entry reflects the total revenue from issuance of preferred shares classified as liabilities.

This entry is recorded according to Accounts 111, 112 and accounts payable (loan amount used for debt payment) after comparison with Accounts 3411, 4111 and relevant accounts in the period.

- Repayment of loans and finance lease principals (Entry 34)

This entry reflects the total repayment of loan principals, preferred shares classified as liabilities and finance lease principals in the accounting period.

This entry does not include the repayment of loan and finance lease principals in the form of non-monetary assets or conversion of the principals into stakes.

This entry is obtained from Accounts 111 and 112 and accounts receivable after comparison with Accounts 341 and 4111 in the accounting period. This entry consists of negative numbers in round brackets.

- Dividends and profits paid to owners (Entry 35)

This entry reflects the total dividends and profits paid to the enterprise’s owners (including personal income tax paid on behalf of the owners) in the accounting period.

This entry does not include the profits converted into owners’ capital contributions, dividends in paid with shares or non-monetary assets, and profits used as contributions to funds.

This entry is obtained from Accounts 111 and 112 after comparison with Accounts 421 and 338 (paid dividends and profits) in the accounting period. This entry consists of negative numbers in round brackets.

- Net cash flows from financing activities (Entry 40)

This entry reflects the difference between the total revenue from and total expenditure on financing activities in the accounting period. Negative numbers shall be put in round brackets.

Entry 40 = Entry 31 + Entry 32 + Entry 33 + Entry 34 + Entry 35.

2.4.4.4. Total cash flows in the period (see Form B03 - DNN)

- Net cash flows in the period (Entry 50)

This entry reflects the difference between total revenue from and expenditure on operating activities, investing activities and financing activities of the enterprise in the accounting period. Negative numbers shall be put in round brackets.

Entry 50 = Entry 20 + Entry 30 + Entry 40.

- Opening cash and cash equivalents (Entry 60)

This entry is recorded according to “Cash and cash equivalents” at the beginning of the period (Entry 11), “opening balance” column on the financial position statement).

- Impact of exchange rate fluctuation (Entry 61)

This entry reflects the exchange difference because of reassessment of closing balance of cash and cash equivalents in foreign currencies (Entry 110 on the financial position statement) at the end of the accounting period.

This entry is obtained from Accounts 111, 112, 128 and relevant accounts (amounts qualified as cash equivalents) after comparison with Account 413 in the accounting period. This entry consists of positive numbers in case of profit and negative numbers (in round brackets) in case of loss.

- Closing cash and cash equivalents (Entry 70)

This entry is recorded according to “Cash and cash equivalents” at the end of the period (Entry 110, “closing balance” column on the financial position statement).

This entry is the total of entries 50, 60 and 61 and equal to Entry 110, “Closing balance” column on the financial statement of the same period.

Entry 70 = Entry 50 + Entry 60 + Entry 61.

2.5. Preparation and presentation of notes to financial statement (see form B09 - DNN)

2.5.1. Purposes of notes to financial statement

a) The notes to financial statement are an integral part of an enterprise’s financial statement and intended to describe or analyze data presented in the financial position statement, income statement, cash flow statement and other necessary information.

b) The notes to financial statement may contain other information deemed necessary by the enterprise.

2.5.2. Rules for preparing and presenting notes to financial statement

a) When preparing the financial statement, the enterprise shall prepare the notes to the financial statement according to instructions herein.

b) The notes to the financial statement must contain the following information:

- The basis of the financial statement, accounting policies applied to important transactions and events;

- Additional information that is not presented in other financial statements but necessary for truthful and rational presentation of the enterprise’s finance and performance.

c) The notes to the financial statement must be systematically presented. The enterprise may arrange the order of the notes to the financial statement as long as each entry of the financial position statement, income statement, and cash flow statement is linked to relevant information in the notes to the financial statement.

2.5.3. Basis of the notes to financial statement

- The financial position statement, income statement and cash flow statement of the same accounting period;

- The accounting books or relevant balance sheets;

- The notes to the financial statement of the previous period;

- The enterprise’s situation and relevant documents.

2.5.4. Contents of the notes to the financial statement

2.5.4.1. The enterprise’s characteristics

a) Type of business entity: Joint-stock company, limited liability company, partnership or sole proprietorship.

b) Operating field: Industry, trading, services, construction or mixed fields.

c) Business lines: primary business lines and characteristics of products or services provided by the enterprise.

d) Ordinary course of business: specify average course of business of the field if longer than 12 months.

dd) Whether the enterprise’s operation in this fiscal year affects the financial statement: events related to the legal environment, market developments, characteristics of business, administration, finance, events such as merger, division, business upsizing or downsizing, etc. that affect the enterprise’s financial statement.

2.5.4.2. Accounting period and currency

a) Whether the accountant period is the same as the calendar year; if not specify the beginning date and ending date.

b) Accounting currency: VND or another currency defined by the Law on Accounting.

2.5.4.3. Accounting standards and accounting policies applied

Declaration of conformity with accounting standards and accounting policies: Whether the financial statement is prepared in conformity with accounting standards and accounting policies applied to small and medium enterprises?

2.5.4.4. Applied accounting policies

(1) Applied exchange rates:

- The enterprise’s regular bank

- Method for determination of actual exchange rates applied to transactions in the period and reassessment of foreign currency monetary items at the end of the period.

(2) Rules for conversion of a financial statement in foreign currency into VND.

(3) Rules for recording cash and cash equivalents: basis for identification of cash equivalents.

(4) Rules for accounting of financial investments

a) Regarding trading securities:

- Time of recording (for listed securities, write T+0 or another time)

- Book value is the fair value or historical cost;

- Basis for making provision against devaluation of trading securities.

b) Loans granted:

- Whether the loans qualified as foreign currency monetary items are reassessed?

- Basis for making allowance for bad debts.

c) Regarding investments in jointly controlled entities and associate companies (according to votes or other agreements):

- Initial recording time.

- Criteria for identification of jointly controlled entities and associate companies (according to proportion of votes, stakes or interests);

- Basis for making provisions against impairment of investments in jointly controlled entities or associates; basis for determination of impairment;

d) Investments in equity instruments of other entities:

- Whether book values of investments in other entities according to historical cost or other criteria?

- Basis for making provisions against impairment of investments in other entities; financial statement for determination of impairment.

dd) Accounting methods applied to other transactions related to financial investments:

- Shares swapping;

- Investments in the form of capital contribution;

- Stake purchase;

- Accounting methods applied to dividends paid with shares;

(4) Rules for accounting of receivables

- Criteria for classifying receivables (trade receivables, intra-company receivables, other receivables).

- Whether the original term, remaining term, currency and debtors of the receivables are monitored;

- Whether the receivables qualified as foreign currency monetary items are reassessed?

- Method for making allowance for bad debts.

(5) Rules for inventory accounting

- Whether inventory is recorded at their historical cost or net realizable values.

- Inventory value calculation method (using weighted average method, FIFO method, specific identification method or retailing price method)

- Inventory accounting: perpetual inventory system or periodic inventory system.

- Method for making provision against devaluation of inventory (positive difference between the historical cost and the net realizable value of inventory). Provision against devaluation of inventory shall be made according to the difference the provision to be made in the current year and that in the previous year.

(6) Rules for accounting and depreciation of fixed assets, finance lease assets and investment property

a) Rules for accounting of tangible fixed assets and intangible fixed assets:

- Rules for accounting of expenses incurred (upgrade, renovation, maintenance, repair expenses) recorded as costs or operating expenses;

- Fixed asset depreciation methods;

- Whether other regulations on management, use and depreciation of fixed assets are complied with?

b) Rules for accounting of finance lease assets:

- How costs are determined.

- Methods for depreciation of finance lease assets.

c) Rules for accounting of investment property

- How costs of investment property are recorded.

- Methods for depreciation of investment property.

(7) Rules for accounting of liabilities

- How are liabilities classified?

- Whether the creditors, original term, remaining term, currency of liabilities are monitored;

- Whether the liabilities qualified as foreign currency monetary items are reassessed?

- Whether provisions are made for liabilities?

(8) Rules for recording and capitalizing borrowing costs:

- Whether borrowing costs are aggregated with financial expense of the period or capitalized?

- Capitalization ratio?

(9) Rules for recording equity:

- Whether contributed capital in reality recorded? How is share premium recorded?

- How is undistributed profit determined?

(10) Rules and methods for recording other revenues and incomes:

- Are revenues from goods sale and service provisions qualified as revenues?

- Revenues from construction contracts

- Rules for recording financial incomes.

- Rules for recording other incomes.

(11) Rules for expense accounting:

- Is cost of goods sold complied with matching principle? Is conservatism principle complied with as expenses beyond the normal level of inventory are promptly recorded? What are decreases in cost of goods sold? Etc.

- Financial expense: Are interest expense payable (including those recorded as accrued expenses) in the period fully recorded?

- Administrative expense: Are selling expenses and enterprise administration expenses incurred in the period fully recorded? What are decreases in selling expenses and enterprise administration expenses? Etc.

2.5.5. Additional information about the financial position statement

- In this part, the enterprise shall analyze the data presented in the financial position statement to help readers better understand the assets, liabilities and equity.

- The units in this part are the same as those in the financial position statement. Data in “Opening balance” column are the same as those in “Closing balance” of the previous year’s financial statement. Data in “Closing balance” column are obtained from:

+ The current year’s financial position statement;

+ The general accounting books;

+ Detailed accounting books or relevant balance sheets.

- In case of retroactive adjustments to previous years’ crucial errors, data of “Opening balance” column must be adjusted to comply with comparability principle and such adjustments must be explained in the notes to the financial statement. If data in “Opening balance” column is not comparable to “Closing balance” column for some reasons, this must be explained in the notes to the financial statement.

- Reasons for failure to determine fair values must be specified.

2.5.6. Additional information about the income statement

- In this part, the enterprise shall analyze the data presented in the income statement to help readers better understand the revenues and expenses.

- The units in this part are the same as those in the income statement. Data in “Previous year” are obtained from the previous year’s notes to the financial statement. Data in “This year” column are obtained from:

+ The current year’s income statement;

+ The general accounting books;

+ Detailed accounting books or relevant balance sheets.

- The enterprise may arrange the order of information in this part as long as they match the income statement and data of different periods are easy to compare.

- If data in “This year” column is not comparable to “Previous year” column for some reasons, this must be explained in the notes to the financial statement.

2.5.7. Additional information about the cash flow statement

- In this part, the enterprise shall analyze the data presented in the cash flow statement to help readers better understand the factors that affect the enterprise’s cash flows.

- The units in this part are the same as those in the cash flow statement. Data in the “Previous year” column is obtained from the notes to the previous year’s financial statement; Data in “This year” column is obtained from:

+ Current year's cash flow statement;

+ The general accounting books;

+ Detailed accounting books or relevant balance sheets.

2.5.8. Other information

Other important information (if any) other than those prevented in aforementioned parts shall be presented in this part if they are deemed necessary for users to understand that the financial statement is truthfully and rationally presented.

SECTION 3. FINANCIAL STATEMENTS OF EXTRA-SMALL ENTERPRISES

Extra-small enterprises shall prepare their financial statements according to the template in Appendix 2 to this Circular and general rules.

Article 82. Contents of financial statements of extra-small enterprises

1. Contents of the financial position statement (Form B01 - DNSN)

1.1. Assets

- Cash and cash equivalents (Entry 110)

This entry reflects cash in funds, demand deposits and cash equivalents of the enterprise at the reporting time.

Total balance of Account 111, Account 112, Account 1281 (term deposits of up to 3 months) and Account 1288 (amounts qualified as cash equivalents) shall be recorded to this entry.

Cash equivalents may include promissory notes, treasury bills, term deposits not exceeding 3 months, etc.

Overdue cash equivalents that are not collected must be transferred to appropriate entries.

- Investments (Entry 120)

This entry reflects total financial investments (minus provision for financial investments), including: trading securities, held to maturity investments and investments in other entities.

Financial investments reflected in this entry does not include those reflected by Entry 110 and collected debts reflected by Entry 130.

The balance of this entry equals (=) the credit balance of Account 121, Account 228, Account 128 (minus financial investments classified as cash equivalents and loans receivable) minus the credit balance of Account 2291 and Account 2292.

- Receivables (Entry 130)

This entry reflects all receivables at the reporting time (minus allowance for bad debts) such as: trade receivables, advance payments to sellers, loans receivable, other receivables, unresolved asset losses, deposits, etc.

The balance of this entry equals (=) the total debit balance of Accounts 131, 136, 138, 141, 334, 338, 1288 (loans granted), 331 (prepayment to sellers) minus (-) the credit balance of Account 2293.

- Inventory (Account 140)

This entry reflects current value of inventory serving the enterprise’s business operation (minus provision against devaluation of inventory) at the reporting time.

The balance of this entry equals (=) the debit balance of Accounts 151, 152, 153, 154, 155, 156, 157 minus (-) the credit balance of Account 2294.

- Remaining values of fixed assets and investment property (Entry 150)

This entry reflects the total remaining value (cost minus accumulated depreciation) of fixed assets and investment property at the reporting time.

The balance of this entry equals (=) the total debit balance of Accounts 211 and 217 minus (-) accumulated depreciation of fixed assets and investment property (credit balance of Account 214).

- Other assets (Entry 160)

This entry reflects the values of assets other than those reflected by Entries 110, 120, 130, 140, 150 such as deducted VAT, prepaid expenses, taxes and receivables from the State, construction in progress, etc.

This entry reflects the debit balance of Accounts 133, 241, 242, 333, etc.

- Total assets (Entry 200)

This entry reflects the total value of the enterprise’s assets at the reporting time.

Entry 200 = Entry 110 + Entry 120 + Entry 130 + Entry 140 + Entry 150 + Entry 160.

1.2. Liabilities (Entry 300)

This entry reflects total liabilities at the reporting time.

Entry 300 = Entry 310 + Entry 320 + Entry 330 + Entry 340 + Entry 350 + Entry 360

- Trade payables (Entry 310)

This entry reflects the amounts payable to sellers.

This entry reflects the total credit balance of Account 331.

- Advance payments by buyers (Entry 320)

This entry reflects advance payments by buyers for goods/services, fixed assets, investment property to be provided by the enterprise at the reporting time (excluding prepaid revenues). This entry reflects the detailed credit balance of Account 131.

- Taxes and other payables to the State (Entry 330)

This entry reflects total amounts payable by the enterprise to the State at the reporting time, including taxes, fees, charges and other amounts payable.

This entry reflects the total credit balance of Account 333.

- Payables to employees (Entry 340)

This entry reflects the amounts payable by the enterprise to its employees at the reporting time.

This entry reflects the credit balance of Account 334.

- Loans payable (Entry 350)

This entry reflects total value of the loans and finance lease liabilities owed by the enterprise to banks, other organizations, financial companies and other entities.

This entry reflects the credit balance of Account 341.

- Other payables (Entry 360)

This entry reflects payables other than those reflected by Entries 310, 320, 330, 340, 350, such as: expenses, intra-company payables, received deposits, provision for payables, unrealized revenues, assets in surplus pending resolution, welfare fund, development of science and technology fund, other amounts payable, etc.

This entry reflects the credit balance of Accounts 1388, 335, 336, 338, 352, 353, 356.

1.3. Equity (Entry 400)

This entry reflects capital owned by shareholders and capital contributors such as capital contributed by owners, equity funds, undistributed post-tax profits, exchange differences, etc.

Entry 400 = Entry 410 + Entry 420 + Entry 430.

- Capital contributions by owners (Entry 410)

This entry reflects total capital contributed by owners, share premium and other capital (if any) of the enterprise at the reporting time.

This entry reflects the credit balance of Account 411.

- Undistributed post-tax profits (420)

This entry reflects the undistributed after-tax profit or loss at the reporting time.

This entry reflects the credit balance of Account 421. If Account 421 has a debit balance, negative numbers shall be put in round brackets.

- Other equity items (Entry 430)

This entry reflects the value of other equity items other than those reflected by Entry 410 and 420. Negative numbers shall be put in round brackets.

This entry reflects the credit balance of Accounts 418 minus (-) the debit balance of Account 419.

- Total capital (Entry 500)

This entry reflects the total capital that creates the enterprise’s assets at the reporting time.

Entry 500 = Entry 300 + Entry 400.

2. Contents of the income statement (Form B02 - DNSN)

- Net revenues from goods sale and service provision (Entry 01)

This entry reflects total revenue from goods sale and service provision minus (-) deductions in the accounting period. This entry does not include indirect taxes incurred during the sale and service provision process.

This entry reflects the debit balance of Account 511 and credit side of Account 911.

- Costs of goods sold (Entry 02)

This entry reflects total cost of goods, investment property, finished products sold and services rendered, and other expenses included in costs minus (-) the amounts recorded as decreases in cost of goods sold in the accounting period.

This entry reflects the credit side of Account 632 and debit side of Account 911.

- Administrative expense (Entry 03)

This entry reflects the total administration expenses incurred in the period.

This entry reflects the credit side of Account 642 and debit side of Account 911.

- Profit/loss on financing activities and other operations (Entry 04)

This entry reflects the profit or loss on financing activities and other operations in the accounting period.

This entry present the difference between the credit balance of Accounts 515 and 711 (minus decreases in financial income and other income) and the debit balance of Accounts 635 and 811 (minus decreases in financial expenses and other expenses).

In case of loss, this entry consists of negative numbers in round brackets.

- Pre-tax accounting profit (Entry 05)

This entry reflects total accounting profit of the enterprise in the accounting period before deducting corporate income tax.

In case of loss, this entry consists of negative numbers in round brackets.

Entry 05 = Entry 01 - Entry 02 - Entry 03 + Entry 04.

- Corporate income tax (Entry 06)

This entry reflects corporate income tax incurred in the accounting period. This entry reflects the credit balance of Account 821 and debit balance of Account 911, or debit balance of Account 821 and credit balance of Account 911 in the accounting period.

- Post-tax profit (Entry 07)

This entry reflects total net profit (or loss) of the year after corporate income tax is paid.

In case of loss, this entry consists of negative numbers in round brackets.

Entry 07 = Entry 05 - Entry 06.

3. Contents of the notes to the financial statement (Form B09 - DNSN)

3.1. The enterprise’s characteristics

a) Type of business entity: Joint-stock company, limited liability company, partnership or sole proprietorship.

b) Operating field: Industry, trading, services, construction or mixed fields.

c) Business lines: primary business lines and characteristics of products or services provided by the enterprise.

3.2. Accounting period and currency

a) Whether the accountant period is the same as the calendar year; if not specify the beginning date and ending date.

b) Accounting currency: VND.

3.3. Accounting standards and accounting policies applied

Declaration of conformity with accounting standards and accounting policies: Whether the financial statement is prepared in conformity with accounting standards and accounting policies applied to Vietnamese enterprises?

3.4. Additional information about the financial position statement

- In this part, the enterprise shall analyze the data presented in the financial position statement to help readers better understand the assets, liabilities and equity.

- The units in this part are the same as those in the financial position statement. Data in “Opening balance” column are the same as those in “Closing balance” of the previous year’s financial statement. Data in “Closing balance” column are obtained from:

+ The current year’s financial position statement;

+ The general accounting books;

+ Detailed accounting books or relevant balance sheets.

- The enterprise may arrange the order of information in this part as long as they match the financial position statement and data of different periods are easy to compare.

3.5. Additional information about the income statement

- In this part, the enterprise shall analyze the data presented in the income statement to help readers better understand the revenues and expenses.

- The units in this part are the same as those in the income statement. Data in “Previous year” are obtained from the previous year’s notes to the financial statement. Data in “This year” column are obtained from:

+ The current year’s income statement;

+ The general accounting books;

+ Detailed accounting books or relevant balance sheets.

- The enterprise may arrange the order of information in this part as long as they match the income statement and data of different periods are easy to compare.

- If data in “Previous year” column is not comparable to “Next year” column for some reasons, this must be explained in the notes to the financial statement.

3.6. Other information requiring explanation

Other important information (if any) other than those prevented in aforementioned parts shall be presented in this part if they are deemed necessary for users to understand that the financial statement is truthfully and rationally presented.

SECTION 4. CONTENTS AND PREPARATION OF THE BALANCE SHEET

Article 83. Contents and preparation of the balance sheet (Form F01 - DNN)

1. Purposes: Reflect current assets and capital sources of a unit in the accounting period and from the beginning of the year to the end of the accounting period, increases and decreases thereof. Data on the balance sheet are the basis for preparing the general accounting books and comparison of data on the financial statement.

2. Basis and method for recording:

The balance sheet is prepared according to the ledger and the previous period’s balance sheet.

Accounting books must be completed before preparing the balance sheet; data in relevant books must be compared;

Data in a balance sheet are classified into:

- Account balances at the beginning (Column 1 and Column 2 - Opening balance) and at the end of the period (Column 5 and Column 6 - Closing balance); accounts having a credit balance are written in “Credit” column; accounts having a debit balance are written in “Debit” column.

- Increases and decreases in the accounts during the accounting period (Column 3 and Column 4);

- Column A and Column B: Numbers and names of accounts used by the unit and some sub-accounts that need analyzing.

- Column 1 and Column 2 - Opening balance: the balance on the first day of the first month of the year. Data in this column are obtained from the balances at the beginning of the first month of the year on the ledger or “Closing balance” of the previous year’s balance sheet.

- Column 3 and 4: credits and debits of accounts in the year. Data in this part are obtained according to the accumulated amounts of each corresponding account on the ledger.

- Column 5 and Column 6 - Closing: the balance on the last day of the year. Data in this part are obtained from the closing balance of the last month of the year on the ledger or Columns 1, 2, 3, 4 of the current year’s balance sheet. Data in Column 5 and Column 6 will be used to prepare the next year’s balance sheet.

The balance sheet will be summed up after relevant data are written. Data on the balance sheet must ensure the mandatory balance of:

Total debit balance (Column 1), Total credit balance (Column 2), Total debits (Column 3), Total debits (Column 4), Total debit balance (Column 5), Total credit balance (Column 6).

Chapter IV

ACCOUNTING DOCUMENTS

Article 84. General provisions

1. Accounting documents used by enterprises must comply with provisions of the Law on Accounting, its elaborating Decrees and amendments thereto.

2. All templates of accounting documents in Appendix 3 enclosed herewith are instructional. Enterprises may design their own accounting documents to satisfy their needs as long as they are conformable with the Law on Accounting, clear, transparent, easy to inspect and compare.

3. Enterprises that do not design their own accounting document may apply the templates in Appendix 3 enclosed herewith.

4. Enterprises having special financing activities that are regulated by other legislative documents shall apply their provisions.

Article 85. Preparing and signing accounting documents

1. Business and financial transactions related to the enterprise’s operation must be recorded into accounting documents. Only one accounting document shall be prepared for each transaction.

2. Accounting documents must be clear, timely, accurate and conformable with templates. An accounting unit may design accounting documents without templates as long as they are conformable with provisions of the Law on Accounting.

3. Abbreviations, erasures and adjustments are not allowed on accounting documents; Accounting documents must be written with pens; numbers and text must be written continuously without interruption; blank spaces must be crossed out. Accounting documents that contain erasures or adjustments are invalid. Erroneous accounting documents shall be crossed out.

4. Each accounting document must have adequate copies.

5. Accounting documents shall bare adequate signatures and positions of the signors. Indelible ink must be used for signatures on accounting documents. Do not us red ink or signature stamps on accounting documents. A person’s signatures on accounting documents must be consistent. The persons who prepare, approve and sign accounting documents are responsible for contents thereof.

6. Accountants of an enterprise that does not have a chief accountant shall make transactions with customers and banks, etc. The chief accountant’s signature shall be received by signatures of such accountants. The accountants shall perform the chief accountant’s rights and obligations.

7. Accounting documents shall be signed by authorized persons. An authorized person must not sign an accounting document before it is completed.

8. The General Director (Director) or legal representative of the enterprise shall decide the persons authorized to sign accounting documents in accordance with law and suitable for asset control and protection.

9. Payment vouchers must be signed by the authorized person or the chief accountant before paying. Every copy of a payment voucher must be signed.

10. The chief accountant (or authorized person) must not sign accounting documents on behalf of the head of the enterprise. The authorized person must not authorize another person to sign accounting documents.

11. Electronic documents shall bear electronic signatures. Signatures on electronic documents are as valid as those on physical documents.

Article 86. Circulation and inspection of accounting documents

1. All accounting documents prepared by the enterprise or received from external entities shall be gathered at the enterprise’s accounting department. The accounting department shall only record them to accounting books after their legitimacy are verified.

2. Order for circulation of accounting documents:

- Prepare, receive, process accounting documents;

- Accountants, chief accountant or authorized person inspect and sign accounting documents;

- Classify, arrange accounting documents and record them to accounting books;

- Put accounting documents in storage.

3. Order for inspection of accounting documents.

- Inspect the clarity, truthfulness and adequacy of the elements on accounting documents;

- Inspect the legitimacy of transactions recorded on accounting documents; compare accounting documents with relevant documents;

- Inspect the accuracy of data and information on accounting documents.

4. In the cases where violations are discovered during inspection of accounting documents, the inspector shall reject the transaction and inform the enterprise’s operator. Regarding accounting documents whose contents or text are not clear or that are made against procedures, the inspector shall return them and only record them after adjustments are made.

Article 87. Translation of accounting documents into Vietnamese language; use, management, printing and issuance of accounting document templates

Accounting documents in foreign languages must be translated into Vietnam when they are used to record accounting books and prepare financial statements in Vietnam.

The accounting unit is responsible for the accuracy and adequacy of translated contents. The Vietnamese translation must be enclosed with the original copy.

Vietnamese translations of documents enclosed with an accounting document in a foreign language such as contracts, payment vouchers, project dossier, annual statement and relevant documents are not required unless they are required by a competent authority.

Enterprises may purchase accounting documents or design and print their own accounting documents as long as they are conformable with the Law on Accounting.

Accounting documents must be carefully protected. Checks and financial instruments must be managed as if cash. Enterprises using electronic documents shall comply with legislative documents on electronic documents

Chapter V

ACCOUNTING BOOKS AND ACCOUNTING METHODS

Article 88. Accounting books

1. Accounting books are used to record and systemize the enterprise’s transactions in chronological order. Each small or medium enterprise only has one accounting book system for an accounting period. Small and medium enterprises shall comply with regulations of the Law on Accounting on accounting books, its instructional documents and amendments.

2. Enterprises may design their own accounting books as long as information about transactions are clear, sufficient, easy to verify and compare. Enterprises that do not design their own accounting books may apply the templates in Appendix 4 enclosed herewith.

3. Enterprises may decide their own accounting methods as long as information about transactions are promptly and fully recorded, easy to verify and compare.

Article 89. Responsibilities of accounting book keepers

Accounting books must be strictly managed; The persons responsible for keeping and making accounting books must be identified. The keeper is responsible for the contents of the accounting book given to him/her throughout its use period. When an accounting book keeper is replaced, the chief accountant shall arrange the handover of responsibility. The handover record must bear the chief accountant’s signature.

Article 90. Opening, making and adjusting accounting books

1. Opening accounting books

The accounting book shall be opened at the beginning of the annual accounting period or when the enterprise is established (for new enterprises). The legal representative and chief accountant of the enterprise shall sign the accounting books. Accounting books may be bound into books or stored separately. Completed pages shall be bound into books for retention. The following procedures must be completed before using an accounting book:

- For books: Write the enterprise’s name, book name, opening date, fiscal year, names and signatures of the keeper, chief accountant and legal representative, closing date or handover date on the first page. The book must be numbered and fan-stamped thoroughly.

- For separate pages: The enterprise’s name, ordinal number, month, name of the keeper must be written on the first page. Each page must bear the signature and seal of the Director or authorized person before use. The pages must be arranged by account in a manner that ensures safety and accessibility.

2. Recording: accounting books shall be made according to verified accounting documents. Data on accounting books must be supported by legitimate and rational accounting documents.

3. Closing: Accounting books shall be closed at the end of the accounting period before the financial statement is prepared. Accounting books shall also be closed in case of stocktaking and other cases prescribed by law.

4. Accounting book keepers that are employees of accounting firms must specify their practising certificate number, name and workplace.

5. Errors in accounting books shall be adjusted in accordance with the Law on Accounting.

6. Errors in previous periods shall be retroactively adjusted.

Chapter VI

IMPLEMENTATION

Article 91. Conversion of balance in accounting books

1. The balance of the following accounts shall be converted:

- $gold, silver, valuable metals and gemstones in Account 1113 and 1123 shall be transferred to Account 152 (Inventory), Account 155 (Finished products), Account 156 (for those classified as inventory) and Account 2288 (for those not classified as inventory).

- Bonds, treasury bills, exchange bills held to maturity and/or not held for trading in Account 121 (Short-term financial investments) shall be transferred to Account 128 (Held to maturity investments) (1288);

- The balance of Account 142 (Short-term prepaid expenses) shall be transferred to Account 242 (Prepaid expenses);

- Short-term deposits in Account 1388 and Account 244 (Long-term deposits) shall be transferred to Account 1386 (Pledges and deposits);

- The provisions in Account 159 and Account 229 shall be transferred to Account 229 (Provision against impairment of assets;

- The balance of Account 311, Account 315, Account 3411 and Account 3412 shall be transferred to Account 341 (Borrowings and finance lease liabilities);

- Account 3414 shall be transferred to Account 3386.

- Accrued expenses for repair and maintenance of fixed assets (if required), environmental costs, relocation costs and similar amounts reflected by Account 335 (Expenses payable) shall be transferred to Account 352 (Provisions for payables (sub-account 3524).

2. Other contents that are not conformable with this Circular must be adjusted to this Circular.

Article 92. Retrospective clause

1. Enterprises shall not depreciate investment property held for capital appreciation and are not required to reverse accrued depreciation made in the previous periods.

2. Enterprises shall explain the changes by comparing this Circular and Decision No. 48/2006/QD-BTC dated September 14, 2006 of the Minister of Finance.

Article 93. Effect

1. This Circular applies to the fiscal year beginning on or after January 01, 2017. All provisions that contravene this Circular are annulled. This Circular supersedes the provisions applied to small and medium enterprises in Decision No. 48/2006/QD-BTC dated September 14, 2006 of the Minister of Finance and Circular No. 138/2011/TT-BTC dated October 04, 2011 of the Ministry of Finance.

2. Ministries, the People’s Committees, Departments of Finance, Provincial Departments of Taxation shall instruct enterprises to implement this Circular. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance for consideration./.