6 vn accounting standard 2nd issuance

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SYSTEM OF VIETNAMESE ACCOUNTING STANDARDS SECOND ISSUANCE

1

STANDARD 01

FRAMEWORK

(Issued and promulgated in pursuance of the Minister of Finance

Decision No 165/2002/QD-BTC dated December 31, 2002) GENERAL 01. The objective of this standard is to prescribe the basic accounting principles and

requirements and the elements of financial statements and recognition of these elements in order to:

a) set a framework for consistent development and review of accounting standards and

regulations; b) assist business entities in keeping records and preparing financial statements

following established accounting standards and regulations in a uniform manner and in dealing with topics to which no clear answer is available under the current regulations to ensure the true and fair disclosure of financial information;

c) assist auditors and reviewers in forming an opinion as to whether financial statements conform with the accounting standards and regulations; and

d) assist users of financial statements in interpreting the financial information disclosed in accordance with the accounting standards and regulations.

02. The accounting principles and requirements and the elements of financial statements

which are prescribed in this standard and dealt with in individual accounting standards shall be applicable nation-wide to enterprises of all economic sectors in Vietnam.

The framework does not override any specific accounting standards, which shall apply in respective circumstances. If the topics have yet to form the subject of an accounting standard, the framework will prevail.

CONTENT OF THE STANDARD BASIC ACCOUNTING PRINCIPLES Accrual Basis 03. Transactions which have effects on assets, liabilities, equities, revenues and expenses

of an enterprise are recognised when they occur, not at the time cash or cash equivalents are received or paid. The financial statements prepared on the accrual basis reflect the past, present and future business performance of the enterprise.

Going Concern 04. Financial statements are normally prepared on the assumption that an enterprise is a

going concern and will continue business for a foreseeable future, that is, the enterprise is assumed to have neither the intention nor the need to liquidate or curtail materially the scale of its operations. If such an intention or need exists, the financial statements may have to be prepared on a different basis and accordingly that fact is disclosed.

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Historical Cost 05. Assets are recognised at historical cost. The historical cost of an asset is the amount of

cash or cash equivalents paid, or payable, or fair value of the asset at the time the asset is recognised. Cost is not changed unless otherwise required under specific standards.

Matching Principle 06. Revenues should match with expenses. The recognition of revenue should be combined

with the recognition of expenses incurred to earn the revenue. Expenses matching with revenue include those incurred in the period the revenue is generated and those incurred in prior periods or accruals which are associated with the revenue of the current period.

Consistency 07. The accounting policies and practices selected by an enterprise should be applied

consistently for at least one accounting period. The causes and effects of any change in the current accounting policies and practices should be disclosed in a note to the financial statements.

Prudence 08. Prudence is the inclusion of a degree of caution in the exercise of the judgement needed

in making estimates in the event of uncertainty. The prudence concept requires that: a) Provisions should be made, however, excessive provision is not allowed; b) Assets and incomes should not be overstated; c) Liabilities and expenses should not be understated; d) Revenues and incomes are recognised if, and only if, it is probable that economic

benefits will flow to the enterprise while expenses should be recognised when there is evidence that economic outflows are probable.

Materiality 09. Information is material if its omission or misstatement could influence the economic

decisions of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Materiality of information is considered in both qualitative and quantitative terms.

REQUIREMENTS ON ACCOUNTING INFORMATION Integrity 10. Accounting information should be recorded and disclosed as supported by sufficient

valid evidence and represents the substance of economic transactions in terms of nature and value.

Objectivity 11. Accounting information to be recorded and disclosed should be factual, truthful and

unbiased.

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Completeness 12. Transactions arising in an accounting period should be completely recorded and

reported. Timeliness 13. Accounting information should be reported on a timely basis, i.e. on or before the due

date. Understandability 14. Information presented in financial statements should be straightforward and

understandable. Users are assumed to have a reasonable knowledge of business, economics, finance and accounting. Information about complex matters is presented in the notes to the financial statements.

Comparability 15. Accounting information should be produced and presented in a consistent manner to

enable users to interpret the enterprise’s financial performance for a period in relation with other enterprises. Otherwise, explanatory notes should be used to disclose the inconsistency to facilitate comparison by users of the enterprise’s accounting information with other enterprises, of the current period with the prior periods and of the financial performance with the budget plan.

16. The requirements on accounting information prescribed in the preceding paragraphs 10,

11, 12, 13, 14 and 15 should be exercised simultaneously. For example, integrity will imply objectivity and timeliness will not override completeness, understandability and comparability.

ELEMENTS OF FINANCIAL STATEMENTS 17. Financial statements present the financial position and performance results of an

enterprise by grouping financial transactions into elements according to their economic characteristics. The elements directly related to the measurement of the financial position in the balance sheet are assets, liabilities and equities and those elements directly related to the measurement of performance results in the income statement are revenues, expenses and incomes.

Financial Position 18. The elements directly related to the measurement of financial position are assets,

liabilities and equity. They are defined as follows:

(a) An asset is a resource which is controlled by the enterprise and from which future economic benefits are expected to flow to the enterprise.

(b) A liability represents a present obligation of the enterprise arising from past transactions or events, the settlement of which is expected to result in an outflow of resources from the enterprise.

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(c) Equity refers to the enterprise’s net assets, that is, the residual interest in the assets after all its liabilities.

19. In assessing whether an item meets the definition as an asset, liability or equity, attention needs to be given to its ownership title and economic reality. In some circumstances, however, assets that are not legally owned by the enterprise are presented in its financial statements by reason of economic reality. For example, in the case of finance leases, the substance and economic reality are that the lessee acquires the economic benefits of the use of the leased asset for the major part of its useful life in return for entering into an obligation to pay for that right an amount approximating to the fair value of the asset and the related finance charge. Hence, the finance lease gives rise to items that satisfy the definition of an asset and a liability recognised in the lessee's balance sheet.

Assets 20. The future economic benefits embodied in an asset represent the potential contribution

to the flow of cash and cash equivalents to, or the potential reduction of cash outflows from, the enterprise.

21. The future economic benefits embodied in an asset may flow to the enterprise when the

asset is:

(a) used separately or in combination with other assets in the production of goods or rendering of services by the enterprise;

(b) exchanged for other assets;

(c) used to settle a liability; or

(d) distributed to the owners of the enterprise. 22. Assets may have physical substance, for example, property, plant and equipment, or a

non-physical substance such as patents and copyrights, from which future economic benefits are expected to flow to the enterprise, and are controlled by the enterprise.

23. Assets of an enterprise may include items which are not owned, but are controlled, by

the enterprise, to which future benefits are expected to flow from the assets, for example finance lease assets. Assets may be ones which are owned by the enterprise and expected to generate future benefits for the enterprise but over which the enterprise has no legal control. For example, know-how obtained from a development activity may meet the definition of an asset when, by keeping that know-how secret, an enterprise controls the benefits that are expected to flow from it.

24. Assets of an enterprise result from past transactions or events, such as contribution,

acquisition, production, endowment and donation. Transactions or events expected to occur in the future do not in themselves give rise to assets.

25. Incurrence of expenses may give rise to assets. Expenses which do not embody future

economic benefits will not constitute assets. The absence of a related expense does not preclude an item from satisfying the definition of an asset for example, items contributed, granted or donated to the enterprise.

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Liabilities 26. A liability represents a present obligation of the enterprise to another entity for an asset

received or a binding contract entered into. 27. Settlement of a present obligation may occur in a number of ways, namely,

(a) payment of cash;

(b) transfer of other assets;

(c) provision of services;

(d) replacement of one obligation with another; or

(e) conversion of the obligation into equity. 28. Liabilities are incurred as a result of past transactions and events, for example,

accounts payable for acquisition of goods and services, receipt of borrowing, commitment to a post-sale service and contractual obligations; payables to employees, taxes payable and other statutory obligations.

Equity 29. Equity presented in the balance sheet includes paid-in capital, premium reserve,

retained earnings, enterprise funds, undistributed profits, foreign exchange differences and revaluation gains/losses.

a) Paid-in capital include proprietor’s capital, contributed capital, share capital and

state funds; b) Premium reserve is the difference between the par value and the selling price of

shares; c) Retained earnings is profit after tax intended as an additional source of capital; d) Enterprise funds include financial reserves, business development funds; e) Undistributed profits is the profit after tax before any dividends to shareholders and

allocation to enterprise funds;

f) Foreign exchange differences include: + Foreign exchange differences which arise in the construction phase; + Foreign exchange differences which arise upon consolidation of an overseas operation’s financial statements using a currency other than that of the reporting enterprise.

g) Revaluation gains/losses represent the difference between the book value of an asset

and the amount re-valued upon authoritative decisions or by the time the asset is transferred for contribution purposes.

Performance Results 30. Profits serve as a measure of an enterprise’s performance. The elements directly related

to the measurement of profit are revenues, other incomes and expenses. Revenues, other incomes and expenses are indicators of the enterprise’s business performance.

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31. Revenues, other incomes and expenses are defined as follows:

(a) Revenues and other incomes are increases in economic benefits as a result of ordinary activities and other events of the enterprise during the accounting period. Revenues and other incomes result in an increase in equity other than owner and shareholder equity.

(b) Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrence of liabilities that result in decreases in equity, other than dividends paid to owners and shareholders.

32. Revenues, other incomes and expenses are presented in the income statement as a

source of information for evaluating the enterprise’s ability to generate cash and cash equivalents in the future.

33. Revenues, other incomes and expenses may be presented in the income statement in

different ways so as to disclose the performance results of the enterprise, such as sales revenues, expenses, operating profit and non-operating profit.

Revenues and Other Incomes 34. Revenue arises in the ordinary course of business and is made up by sales, royalties,

interest and dividends. 35. Other incomes represent items arising from activities other than those generating

revenues, for example, disposals of fixed assets, receipts from penalties…. Expenses 36. Expenses include items that are incurred in the ordinary course of business and other

costs. 37. Expenses that are incurred in the ordinary course of business include, for example, cost

of sales, selling and administrative expenses, interest expense, royalties and items associated with the use of the enterprise’s assets by others for a profit. They usually take the form of cash and cash equivalents, inventory, depreciation of plant and equipment.

38. Other expenses include items other than those arising in the ordinary course of business,

for example expenses related to disposals of fixed assets, penalties for contract breaches….

RECOGNITION OF THE ELEMENTS OF FINANCIAL STATEMENTS 39. Financial statements recognize the elements of the financial position and business

performance of an enterprise in monetary terms for each item. An item is recognised in the financial statements when it concurrently meets the following criteria:

(a) it is probable that any future economic benefit associated with the item will flow

to or from the enterprise; and

(b) the item has a cost or value that can be measured with reliability.

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Recognition of Assets 40. An asset is recognised in the balance sheet when it is probable that future economic

benefits will flow to the enterprise and the asset has a cost or value that can be measured reliably.

41. An asset is not recognised in the balance sheet when it is not probable that the economic

benefits from an expense will flow to the enterprise, to which extent, such an expense will be recognised in the income statement as incurred.

Recognition of Liabilities 42. A liability is recognised in the balance sheet when it is probable that an outflow of

resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably.

Recognition of Revenues and Other Incomes 43. Revenues and other incomes are recognised in the income statement when the increase

in future economic benefits related to the increase in an asset or the decrease of a liability that has arisen can be measured reliably.

Recognition of Expenses 44. Expenses are recognised in the income statement when the decrease in future economic

benefits related to the decrease in an asset or the increase of a liability that has arisen can be measured reliably.

45. Expenses are recognised in the income statement in conformity with the matching

concept. 46. When economic benefits expected to arise over several accounting periods and related

to revenues and other incomes are indirectly measured, related expenses are recognised in the income statement by means of systematic or rational allocation.

47. An expense should be recognised immediately in the income statement if it is unlikely

that it will bring future economic benefits to the enterprise.

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STANDARD 06

LEASES

(Issued and promulgated in pursuance of the Minister of Finance Decision No. 165/2002/QD-BC dated December 31, 2002)

GENERAL 01. The objective of this Standard is to prescribe, for lessees and lessors, the accounting

policies and procedures in relation to finance and operating leases for bookkeeping and financial reporting purposes.

02. This Standard should be applied in accounting for all leases other than:

(a) lease agreements to explore or use natural resources, such as oil, gas, timber, metals and other mineral rights; and

(b) licensing agreements for such items as motion picture films, video recordings,

plays, manuscripts, patents and copyrights. 03. This Standard applies to agreements that transfer the right to use assets even though

substantial services by the lessor may be called for in connection with the operation or maintenance of such assets. This Standard does not apply to agreements that do not transfer the right to use assets.

04. The following terms are used in this Standard with the meanings specified:

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. A finance lease is a lease in which the lessor transfers substantially to the lessee all the risks and rewards incident to ownership of an asset. Title may be transferred at the end of leased period. An operating lease is a lease other than a finance lease. A non-cancelable lease is a lease that is not unilaterally canceled, except (a) upon the occurrence of some remote contingency, such as:

- The lessor does not deliver the leased asset in time; - The lessee does not make payments in accordance with the lease agreement; - Either the lessor or the lessee has been in breach of the lease agreement; - The lessee is bankrupt or dissolved; - The guarantor is bankrupt or dissolved and the lessor does not accept the

proposal of the lessee to terminate the guarantee clause or to change the guarantor;

- The leased asset has been lost or is so damaged that it becomes unfixable.

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(b) with the permission of the lessor; (c) if both parties enter into a new lease for the same or an equivalent asset; or (d) upon payment the lessee of an additional payment at inception. The inception of the lease is the earlier of the date the right to use the asset is transferred or the date the lease begins to be charged in accordance with the lease agreement. The lease term is the non-cancelable period plus (+) any further terms for which the lessee has the option to continue to lease the asset, as specified in the agreement, with or without further payment, if this option can be reasonably defined at the inception of the lease agreement.

Minimum lease payments:

a) In the case of the lessee, are the payments over the lease term that the lessee is required to make (excluding costs for services and taxes paid by, and reimbursed to, the lessor and any contingent rent) together with any amounts guaranteed by the lessee or a party related to the lessee.

b) In the case of the lessor, are the payments over the lease term that the lessee is

required to make (excluding costs for services and taxes paid by, and reimbursed to, the lessor and any contingent rent) plus (+) any residual value guaranteed to the lessor by either:

- the lessee; - a party related to the lessee; or - an independent third party financially capable of meeting this guarantee.

c) Where the lease agreement contains a provision which allows the lessee to purchase

the asset at a price lower than the fair value at the exercise date, the minimum lease payments (for both the lessor and lessee) comprise the minimum payments specified in the lease agreement over the lease term and the necessary payment for the purchase of that asset.

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm's length transaction. Residual value is the value estimated at the inception of the lease term that the lessor expects collect from the leased asset at the end of the lease term. Guaranteed residual value is:

(a) in the case of the lessee, that part of the residual value which is guaranteed by

the lessee or by a party related to the lessee (the amount of the guarantee being the maximum amount that could, in any event, become payable); and

(b) in the case of the lessor, that part of the residual value which is guaranteed by

the lessee or by a third party unrelated to the lessor who is financially capable of discharging the obligations under the guarantee.

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Unguaranteed residual value is that portion of the residual value of the leased asset the realization of which by the lessor is not assured or is guaranteed by the lessee or a party related to the lessor.

Economic life is either the period over which an asset is expected to be economically usable by one or more users, or the number of production or similar units expected to be obtained from the asset by one or more users.

Useful life is the estimated remaining economic life, from the beginning of the lease term, without limitation by the lease term.

Gross investment in the lease is the aggregate of the minimum lease payments

under a finance lease (from the standpoint of the lessor) plus (+) any unguaranteed residual value.

Unearned finance income is the difference between the aggregate of the minimum

lease payments under a finance lease plus (+) any unguaranteed residual value less (-) the present value of the above amounts, at the interest rate implicit in the lease. Net investment in the lease is the gross investment in the lease less unearned finance income. The interest rate implicit in the finance lease is the discount rate that, at the inception of the lease, causes the aggregate present value of the minimum lease payments and the unguaranteed residual value to be equal to the fair value of the leased asset.

The incremental borrowing rate of interest is the rate of interest the lessee would have to pay on a similar finance lease or, the rate that, at the inception of the lease, the lessee would incur to borrow over a similar term, and with a similar security, the funds necessary to purchase the asset. Contingent rent is that portion of the lease payments that is not fixed in amount but is based on a factor other than just the passage of time (e.g., percentage of sales, amount of usage, price indices, market rates of interest).

05. A lease agreement that contains a provision giving the hirer an option to acquire title to

the asset upon the fulfillment of agreed conditions is sometimes known as a hire purchase contract.

CONTENT OF THE STANDARD Classification of Leases 06. The classification of leases adopted in this Standard is based on the extent to which

risks and rewards incident to ownership of a leased asset lie with the lessor or the lessee. Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return due to unfavorable changing economic conditions. Rewards may be represented by the estimated earnings from the operation of the leased asset over the asset's economic life and of gain from appreciation in value or realization of a residual value.

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07. A lease is classified as a finance lease if it transfers substantially all the risks and

rewards incident to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incident to ownership.

08. The lessor and the lessee should classify the lease as finance lease or operating lease at

the inception of the lease term.

09. Whether a lease is classified as finance lease or operating lease depends on the substance of provisions of the lease agreement. Examples of situations which would normally lead to a lease being classified as a finance lease are:

(a) the lease transfers ownership of the asset to the lessee by the end of the lease term;

(b) the lessee has the option to purchase the asset at a price which is expected to be sufficiently lower than the fair value at the end of the lease term;

(c) the lease term is for the major part of the economic life of the asset even if title is not transferred;

(d) at the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and

(e) the leased assets are of a specialised nature such that only the lessee can use them without major modifications being made.

10. A lease could be classified as a finance lease if the lease agrees with one of the following indicators of situation:

(a) if the lessee can cancel the lease, the lessor’s losses associated with the

cancellation are borne by the lessee;

(b) gains or losses from the fluctuation in the fair value of the residual fall to the lessee; and

(c) the lessee has the ability to continue the lease for a secondary period at a rent which is substantially lower than market rent.

11. Lease classification is made at the inception of the lease. If at any time the lessee and the lessor agree to change the provisions of the lease, other than by renewing the lease, in a manner that would have resulted in a different classification of the lease under the criteria in paragraphs 06 to 10 at the inception of the lease, the revised agreement is considered as a new agreement over its term. Changes in estimates (for example, changes in estimates of the economic life or of the residual value of the leased property) or changes in the lessee’s ability to pay do not give rise to a new classification of a lease for accounting purposes.

12. Leases of land-use rights and buildings are classified as operating or finance leases.

However, a characteristic of land is that it normally has an indefinite economic life and, if title is not expected to pass to the lessee by the end of the lease term, the lessee does not receive substantially all of the risks and rewards incident to ownership, and thus, lease of land-use rights is often classified as operating lease. The lease payment for such lease of land-use rights is amortised over the lease term.

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LEASES IN THE FINANCIAL STATEMENTS OF LESSEES Finance Leases 13. Lessees should recognize finance leases as assets and liabilities in their balance

sheets at amounts equal at the inception of the lease to the fair value of the leased property. If the fair value of the leased property is higher than the present value of the minimum lease payments, the lessee should recognize finance lease at that present value. In calculating the present value of the minimum lease payments the discount factor is the interest rate implicit in the lease, or the interest rate in the lease agreement, if this is practicable to determine. If it is not practicable to determine the interest rate implicit in the lease the lessee's incremental borrowing rate should be used to calculate the present value of the minimum lease payments.

14. For the presentation in the balance sheet of liabilities incurred for a finance lease, a

distinction is made between current and non-current liabilities. 15. Initial costs directly attributable to a finance lease, such as costs incurred during the

negotiation stage, are included as part of the cost of the lease asset. 16. Lease payments should be apportioned between the finance charge and the

reduction of the outstanding liability. The finance charge should be allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability for each period.

17. A finance lease gives rise to a depreciation expense for the asset as well as a finance

expense for each accounting period. The depreciation policy for leased assets should be consistent with that for similar depreciable assets which are owned by the lessee. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset should be fully depreciated over the shorter of the lease term or its useful life.

18. In presenting the leased asset in the financial statements, compliance is required with

VAS “Tangible Fixed Assets”. Operating Leases 19. Lease payments under an operating lease (excluding costs for services such as

insurance and maintenance) are recognised as an expense in the income statement on a straight-line basis over the lease term, regardless of the mode of payment, unless another systematic basis is more relevant.

LEASES IN THE FINANCIAL STATEMENTS OF LESSORS Finance Leases 20. Lessors should recognise assets held under a finance lease in their balance sheets

and present them as a receivable at an amount equal to the net investment in the lease.

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21. Under a finance lease substantially all the risks and rewards incident to legal ownership

are transferred by the lessor, and thus the lease payment receivable is treated by the lessor as an account receivable of principal and finance income from its investment and services.

22. The recognition of finance income should be based on a pattern reflecting a

constant periodic rate of return on the lessor's net investment outstanding in respect of the finance lease.

23. A lessor aims to allocate finance income over the lease term based on a pattern

reflecting a constant periodic return on the lessor's net investment outstanding in respect of the finance lease. Lease payments relating to the accounting period, excluding costs for services, are applied against the gross investment in the lease to reduce both the principal and the unearned finance income.

24. Initial direct costs, such as commissions and legal fees, are often incurred by lessors in

negotiating and arranging a lease and are either recognised immediately or deferred over the lease term in matching with the associated income.

Operating Leases 25. Lessors should present assets subject to operating leases in their balance sheets

according to the nature of the asset. 26. Lease income from operating leases should be recognized on a straight-line basis

over the lease term regardless the mode of payment, unless another systematic basis is more relevant.

27. Costs, including depreciation, incurred in earning the lease income are recognized as an

expense in the period. 28. Initial direct costs incurred specifically to earn revenues from an operating lease are

either immediately recognised or deferred over the lease term in matching with the associated operating lease income.

29. The depreciation of depreciable leased assets should be on a basis consistent with

the lessor’s normal depreciation policy for similar assets, and the depreciation charge should be calculated on the basis set out in VAS “Tangible Fixed Assets” and VAS "Intangible Fixed Assets".

30. A manufacturer or dealer lessor recognizes revenue from operating lease activities upon

the appropriate leasing period. Sale and Leaseback Transactions 31. A sale and leaseback transaction involves the sale of an asset by the vendor and the

leasing of the same asset back to the vendor. The accounting treatment of a sale and leaseback transaction depends upon the type of lease involved.

32. If a sale and leaseback transaction results in a finance lease, any excess of sales

proceeds over the carrying amount should be deferred and amortised over the lease term.

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33. If the leaseback is a finance lease, the transaction is a means whereby the lessor

provides finance to the lessee, with the asset as security. For this reason it is not appropriate to regard an excess of sales proceeds over the carrying amount as income. Such excess is deferred and amortised over the lease term.

34. A sale and leaseback transaction resulting in an operating lease is recognised as

follows:

- If the price is established at fair value, any profit or loss should be recognised immediately;

- If the sale price is below fair value, any profit or loss should be recognised

immediately except that, if the loss is compensated by future lease payments at below market price, it should be deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used; or

- If the sale price is above fair value, the excess over fair value should be

deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used.

35. If the leaseback is an operating lease, and the lease payments and the sale price are

established at fair value, there has in effect been a normal sale transaction and any profit or loss is recognised immediately.

36. For operating leases, if the fair value at the time of a sale and leaseback

transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and fair value should be recognized immediately.

37. Disclosure requirements for lessees and lessors apply equally to sale and leaseback

transactions. Any special requirements established in the lease agreement should also be disclosed in the financial statements.

DISCLOSURE Lessees 38. Lessees should make the following disclosures for finance leases:

(a) the net carrying amount of each asset at the balance sheet date; (b) contingent rent recognised in expenses for the period; (c) the basis on which contingent rent payments are determined; (d) provisions on further leasing or right to purchase leased assets.

39. Lessees should make the following disclosures for operating leases:

(a) the total of future minimum lease payments under non-cancellable operating leases for each of the following periods:

(i) not later than one year; (ii) later than one year and not later than five years; or (iii) later than five years.

(b) the basis on which contingent rent payments are determined.

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Lessors 40. Lessors should make the following disclosures for finance leases:

(a) a reconciliation between the total gross investment and the present value of minimum lease payments receivable at the balance sheet date for each of the following periods:

(i) not later than one year;

(ii) later than one year and not later than five years; or

(iii) later than five years.

(b) unearned finance income;

(c) unguaranteed residual values accruing to the benefit of the lessor;

(d) accumulated allowance for uncollectible minimum lease payments receivable; and

(e) contingent rent recognised in income.

41. Lessors should make the following disclosures for operating leases:

(a) The future minimum lease payments under non-cancellable operating leases in

the aggregate for each of the following periods:

(i) not later than one year;

(ii) later than one year and not later than five years; or

(iii) later than five years.

(b) Total contingent rent recognised in income in the period.

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STANDARD 10

THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

(Issued and promulgated in pursuance of Minister of Finance Decision No. 165 /2002/QD-BTC dated December 31, 2002)

GENERAL 01. The objective of this standard is to prescribe the accounting policies and procedures in

relation to effects of changes in foreign exchange rates where an enterprise has transactions in foreign currencies or foreign operations. Such foreign currency transactions and financial statements of foreign operations must be expressed in, and translated into, the enterprise’s reporting currency. This would cover initial recognition and reporting at the balance sheet date, recognition of foreign exchange differences and translation of the financial statements of foreign operations for record keeping and financial reporting purposes.

02. This Standard should be applied:

(a) in accounting for transactions in foreign currencies; and

(b) in translating foreign operations’ financial statements that are included in the financial statements of the enterprise by consolidation or by the equity method.

03. Enterprises are required to use Vietnamese Dong (VND) as the reporting currency

unless otherwise permitted to use another currency which is commonly used. 04. This Standard does not deal with the restatement of an enterprise's financial statements

in a currency other than its reporting currency for use by those accustomed to that currency or for similar purposes.

05. This Standard does not deal with the presentation in a cash flow statement of cash flows

arising from foreign currency transactions and from the translation of cash flows of a foreign operation (see VAS “Cash Flow Statement”).

06. The following terms are used in this Standard with the meanings specified: Foreign operation is a branch, subsidiary, associate, joint venture, business co-

operation or joint operation of the reporting enterprise, the activities of which are based or conducted in a country other than Vietnam.

Foreign entity is a foreign operation, the activities of which are not an integral part of those of the reporting enterprise.

Accounting currency is the currency used in keeping records and in presenting the financial statements.

Foreign currency is a currency other than the reporting currency of an enterprise. Exchange rate is the ratio for exchange of two currencies. Exchange difference is the difference resulting from translating the same number

of units of a foreign currency into the reporting currency at different exchange rates.

Closing rate is the exchange rate at the balance sheet date.

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Net investment in a foreign entity is the reporting enterprise's share in the net

assets of that entity. Monetary items are money held and assets and liabilities to be received or paid in

fixed or determinable amounts of money. Non-monetary items are those items other than monetary items. Fair value is the amount for which an asset could be exchanged, or a liability

settled, between knowledgeable, willing parties in an arm's length transaction. CONTENT OF THE STANDARD FOREIGN CURRENCY TRANSACTIONS Initial Recognition 07. A foreign currency transaction is a transaction which is denominated in or requires

settlement in a foreign currency, including transactions arising when an enterprise either:

(a) buys or sells goods or services whose price is denominated in a foreign currency;

(b) borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency;

(c) becomes a party to an unperformed foreign exchange contract;

(d) acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency; or

(e) otherwise uses one currency to buy or exchange for another currency.

08. A foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

09. The exchange rate at the date of the transaction is often referred to as the spot rate. An

enterprise could use a rate that approximates the actual rate at the date of the transaction. For example, an average rate for a week or a month might be used for all transactions in each foreign currency occurring during that period. However, if exchange rates fluctuate significantly, the enterprise does not use the average exchange rate for accounting purposes during that week or month.

Reporting at Subsequent Balance Sheet Dates 10. At each balance sheet date: (a) foreign currency monetary items should be reported using the closing rate; (b) non-monetary items denominated in a foreign currency should be reported using the

exchange rate at the date of the transaction; and (c) non-monetary items which are carried at fair value denominated in a foreign

currency should be reported using the exchange rates that existed when the values were determined.

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11. The carrying amount of an item is determined in accordance with the relevant

accounting standards. For example, inventory is measured at cost and fixed assets at historical cost. Whether the carrying amount is determined based on historical cost or fair value, the amounts so determined for foreign currency items are then reported in the reporting currency in accordance with this Standard.

Recognition of Exchange Differences 12. Exchange differences arising on the settlement of foreign currency monetary items

or on reporting an enterprise's foreign currency monetary items at rates different from those at which they were initially recorded or reported in previous financial statements, should be recognised as follows:

a) During the construction stage to form fixed assets of a new enterprise, exchange

differences arising from the settlement of foreign currency monetary items serving the construction purpose and from the translation of foreign currency monetary items at the balance sheet date are recorded cumulatively and presented as a separate component on the balance sheet. When the construction work is completed and the fixed assets are put into use, the exchange differences arising during the construction phase are deferred and amortised to production and operating costs over a maximum period of five years.

b) During the course of the business, including the construction of fixed assets of an

active enterprise, exchange differences arising from the settlement of foreign currency monetary items and from the translation of foreign currency monetary items at the balance sheet date are recognised as incomes or expenses of the period, except when dealt with in accordance with paragraphs 12c, 14 and 16.

c) For enterprises that use financial instruments for hedging against foreign exchange

risk, the foreign currency loans or liabilities will be recorded using the exchange rate ruling at the date of transaction. The enterprise is not allowed to re-translate the foreign currency loans or liabilities that have been hedged against foreign currency risk using financial instruments.

13. An exchange difference results when there is a change in the exchange rate between the

transaction date and the date of settlement of any monetary items arising from a foreign currency transaction. When the transaction is settled within the same accounting period as that in which it occurs, all the exchange differences are recognised in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each intervening period up to the period of settlement is determined by the change in exchange rates during that period.

Net Investment in a Foreign Entity 14. Exchange differences arising on a monetary item that, in substance, forms part of an

enterprise's net investment in a foreign entity should be classified as equity in the enterprise's financial statements until the disposal of the net investment, at which time they should be recognised as income or as expenses in accordance with paragraph 30.

15. An enterprise may have a monetary item that is receivable from, or payable to, a

foreign entity. An item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, an extension to, or deduction from, the enterprise's

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net investment in that foreign entity. Such monetary items may include long-term receivables or loans but do not include trade receivables or trade payables.

16. Exchange differences arising on a foreign currency liability accounted for as a hedge

of an enterprise's net investment in a foreign entity should be classified as equity in the enterprise's financial statements until the disposal of the net investment, at which time they should be recognized as income or as expenses in accordance with paragraph 30.

FINANCIAL STATEMENTS OF FOREIGN OPERATIONS Classification of Foreign Operations 17. The method used to translate the financial statements of a foreign operation depends on

the way in which it is financed and operates in relation to the reporting enterprise. For this purpose, foreign operations are classified as either "foreign operations that are integral to the operations of the reporting enterprise" or "foreign entities".

18. A foreign operation that is integral to the operations of the reporting enterprise carries

on its business as if it were an extension of the reporting enterprise's operations. For example, such a foreign operation might only sell goods imported from the reporting enterprise and remit the proceeds to the reporting enterprise. In such cases, a change in the exchange rate between the reporting currency and the currency in the country of foreign operation has an almost immediate effect on the reporting enterprise's cash flow from operations. Therefore, the change in the exchange rate affects the individual monetary items held by the foreign operation rather than the reporting enterprise's net investment in that operation.

19. A foreign entity is an independent business entity which has full legal status in the

country in which it is based and adopts the currency of that country as its reporting currency. It may also enter into transactions in foreign currencies, including transactions in the reporting currency. When there is a change in the exchange rate between the reporting currency and the local currency, there is little or no direct effect on the present and future cash flows from operations of either the foreign entity or the reporting enterprise. The change in the exchange rate affects the reporting enterprise's net investment in the foreign entity rather than the individual monetary and non-monetary items held by the foreign entity.

20. The following are indications of a foreign entity:

(a) the activities of the foreign operation are carried out with a significant degree of autonomy from those of the reporting enterprise;

(b) transactions with the reporting enterprise are not a high proportion of the foreign operation's activities;

(c) the activities of the foreign operation are financed mainly from its own operations or local borrowings rather than from the reporting enterprise;

(d) costs of labour, material and other components of the foreign operation's products or services are primarily paid or settled in the local currency rather than in the reporting currency;

(e) the foreign operation's sales are mainly in currencies other than the reporting currency; and

(f) cash flows of the reporting enterprise are insulated from the day-to-day activities of the foreign operation rather than being directly affected by the activities of the foreign operation.

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The appropriate classification for each operation can, in principle, be established from

factual information related to the indicators listed above. In some cases, the classification of a foreign operation as either a foreign entity or an integral operation of the reporting enterprise may not be clear, and judgement is necessary to determine the appropriate classification.

Foreign Operations that are Integral to the Operations of the Reporting Enterprise 21. The financial statements of a foreign operation that is integral to the operations of

the reporting enterprise should be translated using the standards and procedures in paragraphs 7 to 16 as if the transactions of the foreign operation had been those of the reporting enterprise itself.

22. The individual items in the financial statements of the foreign operation are translated

as if all its transactions had been entered into by the reporting enterprise itself. The cost and depreciation of a fixed asset is translated using the exchange rate at the date of purchase of the asset or, if the asset is carried at fair value, using the rate that existed on the date of the valuation. The cost of inventories is translated at the exchange rates that existed when those costs were incurred. The recoverable amount or realisable value of an asset is translated using the exchange rate that existed when the recoverable amount or net realisable value was determined.

23. For practical reasons, a rate that approximates the actual rate at the date of the

transaction is often used, for example, an average rate for a week or a month might be used for all transactions in each foreign currency occurring during that period. However, if exchange rates fluctuate significantly, the use of the average rate for a period is unreliable.

Foreign Entities 24. In translating the financial statements of a foreign entity for incorporation in its

financial statements, the reporting enterprise should use the following procedures:

(a) the assets and liabilities, both monetary and non-monetary, of the foreign entity should be translated at the closing rate;

(b) revenue, income and expense items of the foreign entity should be translated at exchange rates at the dates of the transactions, except when the foreign entity reports in the currency of a hyperinflationary economy, in which case revenue, income and expense items should be translated at the closing rate; and

(c) all resulting exchange differences should be classified as equity of the reporting entity until the disposal of the net investment.

25. In case the average exchange rate for a period approximates the actual exchange rate, it

will be used to translate revenue, income and expense items of a foreign entity. 26. The translation of the financial statements of a foreign entity results in the recognition

of exchange differences arising from:

(a) translating revenue, income and expense items at the exchange rates at the dates of transactions and assets and liabilities at the closing rate;

(b) translating the opening net investment in the foreign entity at an exchange rate different from that at which it was previously reported; and

(c) other changes to equity in the foreign entity.

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These exchange differences are not recognised as income or expenses for the period

because the changes in the exchange rates have little or no direct effect on the present and future cash flows from operations of either the foreign entity or the reporting enterprise. When a foreign entity is consolidated but is not wholly owned, accumulated exchange differences arising from translation and attributable to minority interests are allocated to, and reported as part of, the minority interest in the consolidated balance sheet.

27. Any goodwill arising on the acquisition of a foreign entity and any fair value

adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign entity are treated as either:

(a) assets and liabilities of the foreign entity and translated at the closing rate in

accordance with paragraph 23; or

(b) assets and liabilities of the reporting entity which either are already expressed in the reporting currency or are non-monetary items which are reported using the exchange rate at the date of the transaction in accordance with paragraph 10(b).

28. The incorporation of the financial statements of a foreign entity in those of the reporting enterprise follows normal consolidation procedures, such as the elimination of intra-group balances and intra-group transactions of a subsidiary (see VSA “Consolidated Financial Statements and Accounting for Share Capital in Subsidiaries” and VAS “Financial Reporting of Interests in Joint Ventures”). However, an exchange difference arising on an intra-group monetary item, whether short-term or long-term, cannot be eliminated against a corresponding amount arising on other intra-group balances because the monetary item represents a commitment to convert one currency into another and exposes the reporting enterprise to a gain or loss through currency fluctuations. Accordingly, in the consolidated financial statements of the reporting enterprise, such an exchange difference continues to be recognized as income or an expense or, if it arises from the circumstances described in paragraphs 14 and 16, it is classified as equity until the disposal of the net investment.

29. The foreign entity should prepare its financial statement at the same reporting date as

the reporting enterprise. When it is impracticable to do this, the enterprise could use the financial statements drawn up to a different reporting date provided that the difference is no greater than three months. In such a case, the assets and liabilities of the foreign entity are translated at the exchange rate at the balance sheet date of the foreign entity. Adjustments are made when appropriate for significant movements in exchange rates up to the balance sheet date of the reporting enterprise in accordance with VSA “Consolidated Financial Statements and Accounting for Share Capital in Subsidiaries” and VAS “Financial Reporting of Interests in Joint Ventures”.

Disposal of a Foreign Entity 30. On the disposal of a foreign entity, the cumulative amount of the exchange

differences which have been deferred (as in paragraph 24c) and which relate to that foreign entity should be recognised as income or as expenses in the same period in which the gain or loss on disposal is recognised.

31. An enterprise may dispose of its interest in a foreign entity through sale, liquidation,

repayment of share capital, or abandonment of all, or part of, that entity. The payment of a dividend forms part of a disposal only when it constitutes a return of the investment. In the case of a partial disposal, only the proportionate share of the related

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accumulated exchange difference is included in the gain or loss. A write-down of the carrying amount of a foreign entity does not constitute a partial disposal. Accordingly, no part of the deferred foreign exchange gain or loss is recognised at the time of a write-down.

Change in the Classification of a Foreign Operation 32. When there is a change in the classification of a foreign operation, the translation

procedures applicable to the revised classification should be applied from the date of the change in the classification.

33. A change in the way in which a foreign operation is financed and operates in relation to

the reporting enterprise may lead to a change in the classification of that foreign operation. When a foreign operation that is integral to the operations of the reporting enterprise is reclassified as a foreign entity, exchange differences arising on the translation of non-monetary assets at the date of the reclassification are classified as equity. When a foreign entity is reclassified as a foreign operation that is integral to the operation of the reporting enterprise, the translated amounts for non-monetary items at the date of the change are treated as the historical cost for those items in the period of change and subsequent periods. Exchange differences which have been deferred are not recognised as income or expenses until the disposal of the operation.

DISCLOSURE 34. An enterprise should disclose:

(a) the amount of exchange differences included in the net profit or loss for the period;

(b) net exchange differences classified as equity (in accordance with paragraph 12a, 14) and as a separate component of equity and such exchange differences at the beginning and end of the period; and

35. When the reporting currency is different from the currency of the country in which

the enterprise is domiciled, the reason for using a different currency should be disclosed, even when there is change in the reporting currency.

36. When there is a change in the classification of a significant foreign operation, an

enterprise should disclose: (a) the nature of the change in classification; (b) the reason for the change; (c) the impact of the change in classification on shareholders' equity; and (d) the impact on net profit or loss of the previous period had the change in

classification occurred at the beginning of the earliest period.

37. An enterprise should disclose the method selected (in accordance with paragraph 27) to translate adjustments on goodwill and fair value arising on the acquisition of a foreign entity.

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STANDARD 15

CONSTRUCTION CONTRACTS

(Issued and promulgated in pursuance of the Minister of Finance Decision No. 165/2002/QD-BC dated December 31, 2002)

GENERAL 01. The objective of this Standard is to prescribe the accounting treatment of revenue and

costs associated with construction contracts, which covers the nature of revenue and costs of a construction contract and the recognition of revenue and costs of a construction contract for record keeping and financial reporting purposes.

02. This Standard should be applied in accounting for construction contracts and

preparing the financial statements of contractors. 03. The following terms are used in this Standard with the meanings specified:

A construction contract is a formal agreement on the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. A fixed price contract is a construction contract in which the contractor agrees to a fixed contract price for the contract as a whole, or a fixed rate per unit of output, which in the case of price escalation is subject to the terms of the contract. A cost plus contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus (+) a percentage of these costs or a fixed fee.

04. A construction contract may be negotiated for the construction of a single asset such as

a bridge, building, dam, pipeline, road or the construction of a number of assets which are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use, such as an oil refinery plant, complex pieces of textile and garment mills etc.

05. For the purpose of this Standard, construction contracts include:

(a) contracts directly related to the construction of the asset, for example, those for the services of investigators and designers or of project managers and architects; and

(b) contracts for the destruction or restoration of assets, and the restoration of the

environment following the demolition of assets. 06. For the purposes of this Standard, construction contracts are classified as fixed price

contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example in the case of a cost plus contract with an agreed maximum price. In such circumstances, a contractor needs to consider all the conditions in paragraphs 23 and 24 in order to determine when to recognize contract revenue and expenses.

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COMBINING AND SEGMENTING CONSTRUCTION CONTRACTS 07. The requirements of this Standard are usually applied separately to each construction

contract. However, in certain circumstances, it is necessary to apply the Standard to the separately identifiable components of a single contract or to a group of contracts together in order to reflect the substance of a contract or a group of contracts.

08. When a contract covers a number of assets, the construction of each asset should be

treated as a separate construction contract when all the following conditions are satisfied:

(a) separate designs and estimates have been submitted for each asset and each asset

can operates independently; (b) each asset has been subject to separate negotiation with the contractor and the

customer has been able to accept or reject that part of the contract relating to each asset; and

(c) the costs and revenues of each asset can be identified.

09. A group of contracts, whether with a single customer or with several customers,

should be treated as a single construction contract when all the following conditions are satisfied:

(a) the group of contracts is negotiated as a single package; (b) the contracts are so closely interrelated that they are, in effect, part of a single

project with an overall profit margin; and

(c) the contracts are performed concurrently or in a continuous sequence.

10. A contract may provide for the construction of an additional asset at the option of the customer or may be amended to include the construction of an additional asset. The construction of the additional asset should be treated as a separate construction contract when:

(a) the asset differs significantly in design, technology or function from the asset(s)

covered by the original contract; or (b) the price of the asset is negotiated without regard to the original contract price.

CONTENTS OF THE STANDARD CONTRACT REVENUE 11. Contract revenue should comprise:

(a) the initial amount of revenue agreed in the contract; and (b) variations in contract work, claims and incentive payments to the extent that it is

probable that they will result in revenue and they are capable of being reliably measured.

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12. Contract revenue is measured at the fair value of the consideration received or

receivable. The measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events. The estimates often need to be revised as events occur and uncertainties are resolved. Therefore, the amount of contract revenue may increase or decrease from one period to the next. For example:

(a) a contractor and a customer may agree variations or claims that increase or decrease

contract revenue in a period subsequent to that in which the contract was initially agreed;

(b) the amount of revenue agreed in a fixed price contract may increase as a result of

cost escalation clauses; (c) the amount of contract revenue may decrease as a result of penalties arising from

delays caused by the contractor in the completion of the contract; or (d) when a fixed price contract involves a fixed price per unit of output, contract

revenue increases as the number of units is increased. 13. A variation is an instruction by the customer for a change in the scope of the work to be

performed under the contract. Examples of variations are changes in the specifications or design of the asset and changes in the duration of the contract. A variation is included in contract revenue when:

(a) it is probable that the customer will approve the variation and the amount of revenue

arising from the variation; and (b) the amount of revenue can be reliably measured.

14. Incentive payments are additional amounts paid to the contractor if specified performance standards are met or exceeded. For example, a contract may allow for an incentive payment to the contractor for early completion of the contract. Incentive payments are included in contract revenue when:

(a) it is probable that the specified performance standards will be met or exceeded; and (b) the amount of the incentive payment can be measured reliably.

15. A claim is an amount that the contractor seeks to collect from the customer or another

party as reimbursement for costs not included in the contract price. For example, customer caused delays, errors in specifications or design, and disputed variations in contract work. The measurement of the amounts of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore, claims are only included in contract revenue when:

(a) negotiations have reached an advanced stage such that it is probable that the

customer will accept the claim; and (b) the amount that it is probable will be accepted by the customer can be measured

reliably.

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CONTRACT COSTS 16. Contract costs should comprise:

(a) costs that relate directly to the specific contract; (b) costs that are attributable to contract activity in general and can be allocated

to the contract; and

(c) such other costs as are specifically chargeable to the customer under the terms of the contract.

17. Costs that relate directly to a specific contract include:

(a) site labor costs, including site supervision; (b) costs of materials and tools used in construction;

(c) depreciation of plant, equipment and other fixed assets used on the contract;

(d) costs of moving plant, equipment and materials to and from the contract site;

(e) costs of hiring plant and equipment;

(f) costs of design and technical assistance that is directly related to the contract;

(g) the estimated costs of rectification and guarantee work, including expected

warranty costs; and

(h) Other costs.

These costs may be reduced by any incidental income that is not included in contract revenue, for example income from the sale of surplus materials and the disposal of plant and equipment at the end of the contract.

18. Costs that may be attributable to contract activity in general and can be allocated to

specific contracts include:

(a) insurance; (b) costs of design and technical assistance that is not directly related to a specific

contract; and

(c) construction overheads.

Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. (Costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs where conditions on capitalized borrowing costs under VAS “Borrowing Costs” are met.)

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19. Costs that are specifically chargeable to the customer under the terms of the contract

may include ground clearance costs and development costs for which reimbursement is specified in the terms of the contract.

20. Costs that cannot be attributed to contract activity or cannot be allocated to a contract

are excluded from the costs of a construction contract. Such costs include:

(a) general administration costs and research and development costs for which reimbursement is not specified in the contract;

(b) selling costs; and

(c) depreciation of idle plant, equipment and other fixed assets that are not used on a

particular contract.

21. Contract costs include the costs attributable to a contract for the period from the date of securing the contract to the final completion of the contract. However, costs that relate directly to a contract and which are incurred in securing the contract are also included as part of the contract costs if they can be separately identified and measured reliably and it is probable that the contract will be obtained. When costs incurred in securing a contract are recognized as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period.

RECOGNITION OF CONTRACT REVENUE AND EXPENSES 22. Revenue and expenses of a construction contract are recognized in accordance with

either of the following procedures: (a) Where it is specified in the contract that progress payments are made as originally

agreed, when the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with the construction contract should be recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity as determined by the contractor on the balance sheet date, without regard to whether the progress payment is invoiced and to how much it is billed.

(b) Where it is specified that payments are made by reference to the amount of work

completed, when the outcome of a construction contract can be estimated reliably and certified by the customer, revenue and contract costs associated with the construction contract should be recognized as revenue and expenses respectively by reference to the stage of completion of the contract activity as certified by the customer in the invoice.

23. In the case of a fixed price contract, the outcome of a construction contract can be

estimated reliably when all the following conditions are satisfied:

(a) total contract revenue can be measured reliably; (b) it is probable that the economic benefits associated with the contract will flow to

the enterprise; (c) both the contract costs to complete the contract and the stage of contract

completion at the balance sheet date can be measured reliably; and

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(d) the contract costs attributable to the contract can be clearly identified and

measured reliably so that actual contract costs incurred can be compared with prior estimates.

24. In the case of a cost plus contract, the outcome of a construction contract can be

estimated reliably when both the following conditions are satisfied:

(a) it is probable that the economic benefits associated with the contract will flow to the enterprise; and

(b) the contract costs attributable to the contract, whether or not specifically

reimbursable, can be clearly identified and measured reliably.

25. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion as disclosed in the statement of income.

26. Under the percentage of completion method, contract revenue and expenses are

recognized in the income statement in the accounting periods in which the work is performed

27. A contractor may have incurred contract costs that relate to future activity on the

contract. Such contract costs are recognized as pre-payments provided it is probable that they will be recovered. Such costs represent an amount due from the customer and are often classified as contract work in progress.

28. The outcome of a construction contract can only be estimated reliably when it is

probable that the economic benefits associated with the contract will flow to the enterprise. However, when an uncertainty arises about the collectability of an amount already included in contract revenue, and already recognized in the income statement, the uncollectable amount or the amount should be recognized as an expense.

29. An enterprise is generally able to make reliable estimates after it has agreed to a

contract which establishes:

(a) each party's enforceable rights regarding the asset to be constructed; (b) the consideration to be exchanged; and

(c) the manner and terms of settlement.

The enterprise reviews and, when necessary, revises the estimates of contract revenue and contract costs as the contract progresses.

30. The stage of completion of a contract based on which revenue is measured may be

determined in a variety of ways. The enterprise uses the method that measures reliably the work performed. Depending on the nature of the contract, one of the following methods could be applied:

(a) the proportion (%) that contract costs incurred for work performed to date bear to

the estimated total contract costs;

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(b) surveys of work performed; or (c) completion of a physical proportion (%) of the contract work. Progress payments and advances received from customers often do not reflect the work performed.

31. When the stage of completion is determined by a percentage (%) of the contract costs

incurred to date over the total contract estimate, only those contract costs that reflect work performed are included in costs incurred to date. Examples of contract costs which are excluded are:

(a) contract costs that relate to future activity on the contract, such as costs of materials

that have been delivered to a contract site or set aside for use in a contract but not yet installed, used or applied during contract performance, unless the materials have been made specially for the contract; and

(b) payments made to subcontractors in advance of work performed under the

subcontract.

32. When the outcome of a construction contract cannot be estimated reliably:

(a) revenue should be recognized only to the extent of contract costs incurred that it is probable will be recoverable; and

(b) contract costs should be recognized as an expense in the period in which they are

incurred. 33. During the early stages of a contract it is often the case that the outcome of the contract

cannot be estimated reliably. In the case that the enterprise will recover the contract costs incurred, contract revenue will be recognized only to the extent of costs incurred that are expected to be recoverable. As the outcome of the contract cannot be estimated reliably, no profit is recognized, even when it is probable that total contract costs will exceed total contract revenues.

34. Contract costs that are not probable of being recovered are recognized as an expense

immediately for cases:

(a) which are not fully enforceable, that is, their validity is seriously in question; (b) the completion of which is subject to the outcome of pending litigation or

legislation;

(c) relating to properties that are likely to be condemned or expropriated;

(d) where the customer is unable to meet its obligations; or

(e) where the contractor is unable to complete the contract or otherwise meet its obligations under the contract.

35. When the uncertainties that prevented the outcome of the contract being estimated

reliably no longer exist, revenue and expenses associated with the construction contract should be recognized to the extent of the work amount completed.

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CHANGES IN ESTIMATES 36. The percentage of completion method is applied on a cumulative basis counting from

the work commencement to the end of each accounting period to the current estimates of contract revenue and contract costs. Therefore, the effect of a change in the estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract, is accounted for as a change in accounting estimate. The changed estimates are used in the determination of the amount of revenue and expenses recognized in the income statement in the period in which the change is made and in subsequent periods.

DISCLOSURE 37. An enterprise should disclose:

(a) the methods used to determine the contract revenue recognized in the period and the stage of completion of contracts in progress.

(b) the amount of contract revenue recognized as revenue in the period; (c) the aggregate amount of costs incurred and recognized profits to date; (d) the gross amount due to customers; (e) the gross amount due from customers;

For those contractors to which progress payments are made as originally agreed (see paragraph 22a) further disclosures are required: (f) progress receipts due from customers; and (g) Progress payments due to customers.

38. The gross amount due to customers is the amount received by the contractor before the

related work is performed. 39. The gross amount due to customers are amounts of progress billings or performance

billings which are not paid until the satisfaction of conditions specified in the contract for the payment of such amounts or until defects have been rectified.

40. Progress receipts due from customers represent the difference between the cumulative

revenue of a construction contract recognized to date and the cumulative amount of progress billings of that contract, in which the former is greater. This indicator applies to construction contracts in progress with recognized cumulative revenue greater than the cumulative amount of progress billings to date.

41. Progress payments due to customers represent the difference between the cumulative revenue of a construction contract recognized to date and the cumulative amount of progress billings of that contract, in which the latter is greater. This indicator applies to construction contracts in progress with the cumulative amount of progress billings to date greater than cumulative revenue recognized to date.

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STANDARD 16

BORROWING COSTS

(Issued in pursuance of the Minister of Finance Decision No. 165/QD-BTC dated December 31, 2002)

GENERAL 01. The objective of this Standard is to prescribe the accounting treatment for borrowing costs,

including the immediate expensing of borrowing costs and the capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset for bookkeeping and financial reporting purposes.

02. This Standard should be applied in accounting for borrowing costs.


Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. A qualifying asset is an asset under construction or in the production process that necessarily takes a substantial period of time (over 12 months) to get ready for its intended use or sale.

04. Borrowing costs may include:

(a) interest on bank overdrafts and short-term and long-term borrowings;

(b) amortization of discounts or premiums relating to borrowings;

(c) amortization of ancillary costs incurred in connection with the arrangement of borrowings; and

(d) finance charges in respect of finance leases. 05. Examples of qualifying assets are items that either are being constructed or have been

completed but not yet put into use; and pieces in production lines by enterprises with a business cycle longer than 12 months.

CONTENTS OF THE STANDARD Recognition 06. Borrowing costs should be recognized as an expense in the period in which they are

incurred, except to the extent that they are capitalized in accordance with paragraph 07.

07. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should be included (capitalized) in the cost of that asset when meeting the qualifications required under this VAS.

08. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset are included in the cost of that asset. Such borrowing costs are capitalized as part of the cost of the asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

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Borrowing Costs Eligible for Capitalization 09. To the extent that funds are borrowed specifically for the purpose of acquiring,

constructing or producing a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset should be determined as the actual borrowing costs incurred on that borrowing during the period less (-) any investment income on the temporary investment of those borrowings.

10. Income that is earned on the temporary investment of those separate amounts of borrowing pending their expenditure on the qualifying asset is deducted from the borrowing costs incurred when capitalized.

11. To the extent that funds are borrowed generally and used for the purpose of acquiring, constructing or producing a qualifying asset, the amount of borrowing costs eligible for capitalization should be determined by applying a capitalization rate to the accumulated weighted average expenditures on that asset. The capitalization rate should be the weighted average of the borrowings of the enterprise that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period should not exceed the amount of borrowing costs incurred during that period.

12. In the case of discounts or premiums relating to borrowings, the amount of borrowing costs should be re-adjusted by appropriately amortizing the amount of discounts and premiums and resetting the capitalization rate. The amortization of discounts and premiums can be realized based on the actual interest rate or straight-line method. The amount of borrowing interest and amortized discounts or premiums capitalized in the period should not exceed the interest actually incurred and discounts and premiums amortized in the period.

Commencement of Capitalization 13. The capitalization of borrowing costs as part of the cost of a qualifying asset should

commence when:

(a) expenditures for acquiring, constructing or producing the asset are being incurred;

(b) borrowing costs are being incurred; and (c) activities that are necessary to prepare the asset for its intended use or sale are

in progress.

14. Expenditures on a qualifying asset include only those that have resulted in payments of cash, transfer of other assets or the assumption of interest bearing liabilities, not any subsidy or grant relating to the asset.

15. The activities necessary to prepare the asset for its intended use or sale include physical construction, production, technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits prior to the commencement of the physical construction. However, such activities exclude the holding of an asset when no production or development that changes the asset's condition is taking place. For example, borrowing costs incurred while land is under development are capitalized during the period in which activities related to the development are being undertaken. However, borrowing costs incurred while land acquired for building purposes is held without any associated development activity do not qualify for capitalization

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Suspension of Capitalization 16. Capitalization of borrowing costs should be suspended during extended periods in which

active development of the asset is interrupted, unless such interruption is considered necessary.

17. Capitalization of borrowing costs is suspended when the construction or production of the asset is sub-normally interrupted. The amount of borrowing costs incurred should be recognized as part of the period’s expenses until the construction and production of the asset is resumed.

Cessation of Capitalization 18. Capitalization of borrowing costs should cease when substantially all the activities

necessary to prepare the qualifying asset for its intended use or sale are complete. Subsequent borrowing costs should be recognized as part of the period’s expenses.

19. An asset is normally ready for its intended use or sale when the physical construction and production of the asset is complete even though routine administrative work might still continue. If minor modifications, such as the decoration of a property to the purchaser or user's specification, are all that are outstanding, this indicates that substantially all the activities are complete.

20. When the construction of a qualifying asset is completed in parts and each part is capable of being used while construction continues on other parts, capitalization of borrowing costs should cease when substantially all the activities necessary to prepare that part for its intended use or sale are completed.

21. A business park comprising several buildings, each of which can be used individually, capitalization should be ceased of the amount borrowed for each component now completed. However, for an industrial plant constructed involving several work items on the one line, capitalization should be ceased only when these items are at the same time completed.

DISCLOSURE 22. The financial statements should disclose:

(a) the accounting policy adopted for borrowing costs; (b) the amount of borrowing costs capitalized during the period; and

(c) the capitalization rate used to determine the amount of borrowing costs eligible

for capitalization.

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STANDARD 24

CASH FLOW STATEMENTS

(Issued in pursuance of the Minister of Finance Decision No. 165/QD-BTC dated December 31, 2002)

GENERAL 01. The objective of this Standard is to prescribe the principles and procedures of preparing

and presenting the cash flow statement. 02. This Standard is applied in relation to the preparation and presentation of the

cash flow statement. 03. The cash flow statement, one of the financial statements, provides information that

enables users to evaluate the changes in net assets of an enterprise, its financial structure, liquidity and solvency and its ability to generate cash flows in the business process. The cash flow statement is useful in assessing the enterprise’s performance and in making comparisons of different enterprises because it eliminates the effects of using various accounting treatments for the same transactions and events.

The cash flow statement is often used for assessing and estimating the amount, timing and certainty of future cash flows. It is also useful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices.


Cash comprises cash on hand, cash in transit and demand deposits.

Cash equivalents are short-term investments (for a period not exceeding 3 months) that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Cash flows are inflows and outflows of cash and cash equivalents, not including internal movement of cash and cash equivalents.

Operating activities are the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities.

Investing activities are the acquisition, construction and disposal of long-term assets and other investments not included in cash equivalents.

Financing activities are activities that result in changes in the size and composition of the equity capital and borrowings of the enterprise.

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CONTENTS OF THE STANDARD Presentation of a Cash Flow Statement 05. The cash flow statement should report cash flows during the period classified by

operating, investing and financing activities. 06. An enterprise presents its cash flows from operating, investing and financing activities

in a manner which is most appropriate to its business. Classification and reporting by activity provides information that allows users to assess the impact of those activities on the financial position of the enterprise and the amount of cash and cash equivalents generated in the period. This information may also be used to evaluate the relationships among those activities.

07. A single transaction may include cash flows from different activities. For example,

when the cash repayment of a loan includes both interest and capital, the interest element may be classified as an operating activity and the capital element is classified as a financing activity.

Operating Activities 08. Cash flows arising from operating activities are the cash flows relating to revenue-

producing activities of an enterprise which provide users with essential information to assess the enterprise’s ability to generate cash from the operating activity to repay loans, maintain the operating capability of the enterprise, pay dividends and make new investments without recourse to external sources of financing. Information about the specific components of historical operating cash flows is useful, in conjunction with other information, in forecasting future operating cash flows. Examples of cash flows from operating activities are: (a) cash receipts from the sale of goods and the rendering of services;

(b) cash receipts from other revenue (royalties, fees, commissions and other items except cash receipts from investing and financing activities);

(c) cash payments to suppliers for goods and services;

(d) cash payments to and on behalf of employees, such as salaries, wages, bonuses, insurance, allowance etc;

(e) cash payments of loan interest;

(f) cash payments of income taxes;

(g) cash refunds of taxes;

(h) cash receipts of compensation, penalty from customers for contract breaches;

(i) cash payments to and cash receipts from an insurance enterprise for premiums, claims and other policy benefits;

(j) cash payments of compensation, penalty for contract breaches by the enterprise.

09. Cash flows arising from the purchase and sale of trading securities are classified as

operating activities.

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Investing Activities 10. Cash flows arising from investing activities represent the cash flows relating to the

acquisition, construction and disposal of long-term assets and investments other than cash equivalents. Examples of cash flows arising from investing activities are:

(a) cash payments to acquire and construct fixed assets and other long-term assets,

including those relating to development costs capitalized as tangible fixed assets; (b) cash receipts from sales of fixed assets and other long-term assets; (c) cash advances and loans made to other parties, other than advances and loans made

by banks and financial and credit institutions; cash payments to acquire debt instruments of other enterprises, other than payments for those instruments considered to be cash equivalents or those held for dealing or trading purposes;

(d) cash receipts from the repayment of advances and loans made to other parties, other than advances and loans of banks and financial and credit institutions; cash receipts from sales of debt instruments of other enterprises (other than receipts for those instruments considered to be cash equivalents and those held for dealing or trading purposes);

(e) cash payments for investment in other enterprises, other than payments to acquire trading shares;

(f) cash receipts of investment in other enterprises, other than receipts from sales of trading shares; and

(g) cash receipts of interest and dividends. Financing Activities 11. Cash flows arising from financing activities are the cash flows relating to the changes in

the size and structure of equity capital and loaned capital of the enterprise. Examples of cash flows arising from financing activities are: (a) cash proceeds from issuing shares and taking over owner’s capital;

(b) cash payments to owners to acquire or redeem the enterprise's shares;

(c) cash proceeds from short-term and long-term borrowings;

(d) cash repayments of amounts borrowed;

(e) cash payments for a finance lease; and

(f) cash payments of interest and dividends.

Operating Cash Flows of Banks, Financial and Credit Institutions and Insurance Companies 12. Cash flows of banks, financial and credit institutions and insurance enterprises arise in a

manner unique to their operations. In preparing the cash flow statement, it is required that cash flows should be classified taking into account the business nature and characteristics.

13. For banks and financial and credit institutions, examples of cash flows arising form

operating activities are: (a) cash payments for loans;

(b) cash receipts from collections on loans;

(c) cash receipts from capital mobilization, including deposits and savings;

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(d) cash repayments of mobilized capital, including deposits and savings received;

(e) cash receipts and cash payments of deposits entrusted by other banks and financial and credit institutions;

(f) cash payments and cash receipts of deposits entrusted to other banks and financial and credit institutions;

(g) cash receipts and cash payments of service charges, commissions;

(h) cash receipts of loan and deposit interest;

(i) cash payments of borrowing and deposit interest;

(j) gains and losses of deals in foreign currencies;

(k) cash receipts and payments of trading shares with securities companies;

(l) cash proceeds from sales of trading shares;

(m) cash payments for acquisition of trading shares;

(n) cash receipts of a bad-debt written off;

(o) other receipts from operating activities; and

(p) other payments for operating activities.

14. For insurance enterprises, premiums, claims and amounts received and paid in relation

to an insurance contract should all be classified as operating cash flows. 15. For banks, financial and credit institutions and insurance enterprises, cash flows from

the investing and financing activities are classified in the same manner as those of other enterprises, except for loans which are classified as operating cash flows as they are attributable to the business’s revenue producing activities.

METHOD OF PREPARING THE CASH FLOW STATEMENT Reporting Cash Flows from Operating Activities 16. An enterprise should report cash flows from operating activities using either:

(a) the direct method, whereby major classes of cash inflows and cash outflows are disclosed and determined either : - by separating and totaling cash receipts and payments by respective

transaction types from the accounting records of the enterprise; or

- by adjusting sales, cost of sales and other items in the income statement for:

+ changes during the period in inventories and operating receivables and payables;

+ other non-cash items; and

+ cash flows associated with investing or financing activities. (b) the indirect method, whereby cash flows are determined by adjusting the

following against income before tax: - non-cash items of revenue, expenses such as depreciation, provisions…

- unrealized foreign currency gains and losses;

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- cash payments of income tax;

- changes during the period in inventories and operating receivables and payables (other than income tax and after-tax payables); and

- profit/loss from investing activities.

Reporting Cash Flows from Investing and Financing Activities 17. An enterprise should report separately cash flows from investing and financing

activities, except to the extent that cash flows described in paragraphs 18 and 19 are reported on a net basis.

Reporting Cash Flows on a Net Basis 18. Cash flows arising from the following operating, investing or financing activities may

be reported on a net basis:

(a) cash receipts and payments on behalf of customers: - rents collected on behalf of, and paid over to, the owners of properties;

- funds held for customers by an investment enterprise; and

- the acceptance and repayment of demand deposits of a bank; and remittance and settlement via bank

(b) cash receipts and payments for items in which the turnover is quick and maturity

is short. - deals in foreign currencies;

- the purchase and sale of investments; and

- other short-term borrowings or loans with a maturity period of three months or less.

19. Cash flows arising from each of the following activities of a bank or a financial and

institution may be reported on a net basis: (a) the acceptance and repayment of deposits with a fixed maturity date;

(b) the placement of deposits with and withdrawal of deposits from other financial and credit institutions; and

(c) cash advances and loans made to customers and the repayment of those advances and loans.

Foreign Currency Cash Flows 20. Cash flows arising from transactions in a foreign currency should be recorded in an

enterprise's reporting currency at the exchange rate of the transaction date. The cash flow statement of a foreign subsidiary should be translated into the reporting currency of the holding company at the actual rate at the date of the cash flow.

21. Unrealized gains and losses arising from converting foreign currencies into the

reporting currency are not cash flows. However, the differences resulting from conversion of deposited cash and cash equivalents in foreign currencies should be separately presented in the cash flow statement in order to reconcile cash and cash equivalents at the beginning and the end of the period.

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Interest and Dividends 22. For enterprises other than banks and financial and credit institutions interest paid is

usually classified as operating cash flows. Interest and dividends received are classified as investing cash flows. Interest and dividends paid are classified as financing cash flows. These cash flows should be separately disclosed as either operating, investing or financing activities presented as appropriate in the cash flow statement.

23. For banks and financial and credit institutions, interest paid and interest received are

classified as operating cash flows, except for the amount of interest received which is otherwise specifically identified as investing cash flows. Interest and dividends received are classified as investing cash flows. Interest and dividends paid are classified as financing cash flows.

24. The total amount of interest paid during a period is disclosed in the cash flow statement

whether it has been recognized as an expense or capitalized in accordance with VAS “Borrowing Costs”.

Taxes on Income 25. Cash flows arising from taxes on income should be classified as cash flows from

operating activities (unless they can be specifically identified as investing activities) and should be separately disclosed in the cash flow statement.

Acquisitions and Disposals of Subsidiaries and Other Business Units 26. Cash flows arising from acquisitions and disposals of subsidiaries and other business

units are classified as investment activities and should be presented separately in the cash flow statement.

27. The aggregate amount of cash paid or received as purchase or sale consideration is

reported in the cash flow statement net of cash and cash equivalents acquired or disposed of.

28. An enterprise should disclose in a note to the financial statements, in aggregate, in

respect of both acquisitions and disposals of subsidiaries and other business units during the period each of the following: (a) The total purchase or disposal consideration; (b) the portion of the purchase or disposal consideration discharged by means of cash or

cash equivalents; (c) the amount of cash and cash equivalents available in the subsidiaries and

other business units purchased or disposed of. (d) The amount of the assets and liabilities other than cash and cash equivalents

in the subsidiaries and other business units purchased or disposed of. This amount should be summarized by each category.

Non-cash Transactions 29. Investing and financing transactions that do not require the use of cash or cash

equivalents should be excluded from a cash flow statement.

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30. Many investing and financing activities do not have a direct impact on current cash

flows although they do affect the capital and asset structure of an enterprise. Hence, they should not be disclosed in the cash flow statement but in a note to the financial statements. Examples of non-cash transactions are:

(a) the acquisition of assets either by assuming directly related liabilities or by means of

a finance lease; (b) the acquisition of an enterprise by means of an equity issue; and (c) the conversion of debt to equity.

Components of Cash and Cash Equivalent 31. An enterprise should disclose the components of opening and closing cash and cash

equivalents and the effect of any change in exchange rates on available cash and cash equivalents for reconciliation of the amounts in its cash flow statement with the equivalent items reported in the balance sheet.

Other Disclosures 32. An enterprise should disclose the amount of, and a commentary for, significant cash

and cash equivalent balances held by the enterprise that are not available for use because of legal restrictions or other constraints set upon the enterprise.

33. There are various circumstances in which cash and cash equivalent balances held by an

enterprise are not available for use in business. Examples include receipts of deposits, mortgages, special purpose funds, project funds…

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APPENDIX 1

(Standard cash flow statement

for enterprises other than banks and and credit financial institutions)

CASH FLOW STATEMENT (Form 1) (Under direct method)

Unit:…………….. Description Code Current

period Prior

period (1) (2) (3) (4)

I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Cash received from sales of goods and services 01 2. Cash paid to suppliers for goods and services 02 3. Cash paid to employees 03 4. Interest paid 04 5. Income tax paid 05 6. Other receipts from operating activities 06 7. Other payments on operating activities 07 Net cash flows from operating activities 20 II. CASH FLOWS FROM INVESTING ACTIVITIES 1. Additions to fixed assets and other long-term assets 21 2. Proceeds from disposals of fixed assets and other long-term assets

22

3. Payments for purchase of debt instruments of other entities 23 4. Proceeds from sales of debt instruments of other entities 24 5. Payments for investment in other entities 25 6. Collections on investment in other entities 26 7. Receipts of interest, dividends 27 Net cash flows from investing activities 30 III. CASH FLOWS FROM FINANCING ACTIVITIES 1. Proceeds from equity issue and owner’s equity 31 2. Payments for shares returns and repurchase 32 3. Proceeds from short-term and long-term borrowings 33 4. Payments to settle debts (principal) 34 5. Payments to settle finance lease 35 6. Payments of interest, dividends 36 Net cash flows from financing activities 40 Net cash flows in the period (20 + 30 + 40) 50 Cash at beginning of year 60 Cash at end of year 70

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CASH FLOW STATEMENT (Form 2) (Under indirect method)

Unit:……..

Description Code Current period

Prior period

(1) (2) (3) (4) I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Profit before tax 01 2. Adjustments for: 02 - Depreciation and amortization 03 - Provisions 04 - Unrealized foreign exchange gains/losses 05 - Profits/losses from investing activities 06 - Interest expense 07 Operating profit before changes in working capital 08 - Increase/decrease in receivables 09 - Increase/decrease in inventories 10 - Increase/decrease in payables (other than interest, income tax) 11 - Increase/decrease in prepaid expenses 12 - Interest paid 13 - Income tax paid 14 - Other receipts from operating activities 15 - Other payments on operating activities 16 Net cash flows from operating activities 20 II. CASH FLOWS FROM INVESTING ACTIVITIES 1. Additions to fixed assets and other long-term assets 21 2. Proceeds from disposals of fixed assets and other long-term assets

22

3. Payments for purchase of debt instruments of other entities 23 4. Proceeds from sales of debt instruments of other entities 24 5. Payments for investment in other entities 25 6. Collections on investment in other entities 26 7. Receipts of interest, dividends 27 Net cash flows from investing activities 30 III. CASH FLOWS FROM FINANCING ACTIVITIES 1. Proceeds from equity issue and owner’s equity 31 2. Payments for shares returns and repurchase 32 3. Proceeds from short-term and long-term borrowings 33 4. Payments to settle debts (principal) 34 5. Payments to settle finance lease 35 6. Payments of interest, dividends 36 Net cash flows from financing activities 40 Net cash flows in the period (20 + 30 + 40) 50 Cash at beginning of year 60 Impacts of exchange rate fluctuations 61 Cash at end of year (50+ 60 + 61) 70

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APPENDIX 2

(Standard cash flow statement for banks and financial and credit institutions)

CASH FLOW STATEMENT

(Under direct method) Unit:……...

Description Code Current period

Prior period

(1) (2) (3) (4) I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Payments for loans 01 2. Returns from loans (principal) released 02 3. Proceeds from capital mobilization 03 4. Repayments of mobilized capital 04 5. Receipts of deposits from and payments of deposits to other banks or/and financial and credit institutions

05

6. Payments for deposits to and returns on deposits from other banks and financial and credit institutions

06

7. Service charges and commission received and paid 07 8. Receipts of loan and deposit interest 08 9. Payments of borrowing and deposit interest 09 10. Foreign exchange gains/losses 10 11. Proceeds from or payments for equity deals with securities companies

11

12. Payments for purchase of trading securities 12 13. Receipts from sales of trading securities 13 14. Collections on debts written off 14 15. Other receipts from operating activities 15 16. Other payments on operating activities 16 Net cash flows from operating activities 20 II. CASH FLOWS FROM INVESTING ACTIVITIES 1. Additions to fixed assets and other long-term assets 21 2. Proceeds from disposals of fixed assets and other long-term assets

22

3. Payments for purchase of debt instruments of other entities 23 4. Proceeds from sales of debt instruments of other entities 24 5. Payments for investment in other entities 25 6. Collections on investment in other entities 26 7. Receipts of interest, dividends 27 9. Profits received from investing activities 28 Net cash flows from investing activities 30 III. CASH FLOWS FROM FINANCING ACTIVITIES 1. Proceeds from equity issue and owner’s equity 31 2. Payments for shares returns and repurchase 32 3. Proceeds from short-term and long-term borrowings 33 4. Payments to settle debts (principal) 34 5. Payments to settle finance lease 35 6. Payments of interest, dividends 36 Net cash flows from financing activities 40 Net cash flows in the period (20 + 30 + 40) 50 Cash at beginning of year 60 Impacts of exchange rate fluctuations 61 Cash at end of year (50+ 60 + 61) 70