Circular No. 07-TC/TCDN guides the preparation and examination of financial statements for state-owned enterprises in 1996.

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 07 TC/TCDN ON FEBRUARY 27, 1997 GUIDING THE WORK OF PREPARATION AND REVIEW OF FINANCIAL REPORTS FOR 1996 OF STATE ENTERPRISES
FOR THE YEAR 1996 OF STATE ENTERPRISES

On the basis of the current financial system applicable to state enterprises in 1996;

Pursuant to Decree No. 59/CP dated October 3, 1996 of the Government promulgating the "Regulation on Financial Management and Business Accounting of State Enterprises," and the guiding circulars of the Ministry of Finance, the Ministry of Finance guides the work of preparing financial reports, profit distribution, and reviewing financial reports for state enterprises in 1996 as follows:

I. THE PREPARATION OF FINANCIAL REPORTS

The preparation of financial reports by enterprises shall be carried out in accordance with the "Enterprise Accounting System" issued together with Decision No. 1141 TC/QĐ/CĐKT dated November 1, 1995 of the Minister of Finance and the model financial regulation of State-owned Corporations issued together with Decision No. 838 TC/TCDN dated August 28, 1996 of the Minister of Finance, noting the following issues:

1. The results of rechecking capital and assets on January 1, 1996 must be reflected in the enterprise's accounting records according to the notification of the results of the review by the agency managing state capital and assets at the enterprise. The calculation of depreciation of fixed assets and the use of budget funds must be based on the notified figures.

2. Enterprises must conduct an inventory of assets (fixed assets, circulating assets) and reconcile receivables and payables before preparing financial reports. Any discrepancies between the inventory and reconciliation figures and the books must be clearly identified and resolved according to current regulations. The consolidated report of asset inventory and reconciliation of receivables and payables of the enterprise must be submitted along with the financial report to the agency managing state capital and assets at the enterprise.

3. For changes in depreciation of fixed assets in 1996, the Decision No. 51/TTg dated January 21, 1995 of the Prime Minister and Circular No. 36 TC/TCDN dated April 27, 1995 of the Ministry of Finance shall still apply. The final deadline for submitting files to handle changes in depreciation is June 30, 1997.

4. Enterprise expenses incurred in 1996 shall be implemented according to the current regulations applicable throughout 1996 (before the issuance of Decree No. 59/CP and the guiding circulars of the Ministry of Finance). The wage fund of enterprises shall be calculated based on the approved wage rate by the competent authority or registered with the competent authority according to Circular No. 20 LB/TT dated June 2, 1993 of the Ministry of Labor, War Invalids and Social Affairs - Finance.

5. For losses from previous years, enterprises may transfer them to pre-tax income according to the provisions of the Corporate Income Tax Law and guiding documents (Decree No. 57/CP dated August 28, 1993 of the Government, Circular No. 75A TC/TCT dated August 31, 1993 of the Ministry of Finance, Official Letter No. 348/KTTH dated January 21, 1995 of the Government Office, and Official Letter No. 1167 TC/TCDN dated May 10, 1995 of the Ministry of Finance). Upon expiration of the loss transfer period as prescribed, enterprises shall use post-tax profits to offset remaining losses before setting up enterprise funds. Cases of transferring losses beyond the prescribed period must have approval from the Prime Minister.

6. The level of establishment of enterprise funds shall continue to be implemented according to Circular No. 12TC/CN dated February 23, 1994 of the Ministry of Finance, applicable to the establishment of enterprise funds for 1994 and 1995.

7. The financial report of the enterprise must be prepared in accordance with the enterprise accounting system issued together with Decision No. 1141TC/QĐ/CĐKT of the Minister of Finance. Specifically:

+ Balance sheet

+ Operating results

+ Explanation of financial reports.

All reports must comply with the format and be sent to relevant state management agencies as stipulated. In particular, the consolidated financial report of state corporations must be sent to the State Capital and Asset Management General Department (Ministry of Finance) and other state management agencies as stipulated for independent state enterprises.

For dependent enterprises when submitting financial reports to their superiors, they must also send them to the State Capital and Asset Management General Department, and the local tax bureau where the enterprise is headquartered.

8. Currently, there is no guidance on internal auditing, and the internal auditing force and independent auditing are limited, so the financial report for 1996 does not necessarily require signatures from internal auditors or independent auditors. The State encourages enterprises to implement internal auditing under the form of State Corporations organizing audits for member enterprises or hiring independent auditing companies to conduct audits before submitting financial reports to functional agencies.

II. REVIEW OF FINANCIAL REPORTS FOR 1996
OF ENTERPRISES:

According to the spirit of Decree No. 59/CP regulating the financial system and business accounting of state enterprises, the finance agency will not approve the financial reports of state enterprises for 1996. After completing the submission of financial reports to relevant agencies, enterprises shall disclose financial information in accordance with Circular No. 73 TC/TCDN dated November 12, 1996 of the Ministry of Finance. Based on the financial reports of enterprises, the State Capital and Asset Management General Department will consolidate and analyze the situation of state enterprises by region and economic sector to report to the Ministry of Finance and related agencies.

The Ministry of Finance assigns the State Capital and Asset Management General Department to take the lead in coordinating with the tax agency to organize the review of financial reports for 1996 of state enterprises.

The financial statement review shall be conducted after the enterprise submits the report to the competent authorities. Prior to conducting the review, the enterprise must be notified of the review date to arrange its work accordingly. The scope of the review may be comprehensive or focused on one or several issues depending on the situation of the enterprise and the capacity of the reviewing authority. At the conclusion of the review, a record must be established detailing the correct and incorrect points of the enterprise and recommendations for handling. If violations of financial management regulations, such as incorrect accounting leading to loss of state capital or failure to fulfill tax obligations to the state budget, are discovered during the review, the enterprise shall bear legal responsibility for its errors.

In 1996, which is the first year implementing the removal of approval for final accounts and enterprises conducting public financial reporting, the review needs to be carried out promptly and strictly directed. Any arising difficulties need to be reported and resolved in a timely manner.

III. FINAL PROVISIONS:

This Circular takes effect from the date of issuance and applies to the preparation and verification of financial statement data for the year 1996 of state-owned enterprises.

During implementation, any difficulties encountered should be reported to the Ministry of Finance for study and resolution.