Circular No. 122/2004/TT-BTC guiding the implementation of accounting and auditing systems for enterprises and organizations with foreign capital operating in Vietnam.

CIRCULAR

Guidelines for Accounting and Auditing Systems for Enterprises and Organizations with Foreign Investment Operating in Vietnam

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- Pursuant to the Accounting Law dated June 17, 2003, Decree No. 129/2004/NĐ-CP dated May 31, 2004 of the Government detailing and guiding the implementation of certain provisions of the Accounting Law in business operations, and Decree No. 185/2004/NĐ-CP dated November 4, 2004 of the Government on administrative penalties in the field of accounting.

- Pursuant to the Law on Foreign Investment in Vietnam dated June 17, 1996, the Law Amending Certain Provisions of the Law on Foreign Investment in Vietnam dated June 27, 2000, and Decree No. 24/2000/NĐ-CP dated July 31, 2000, and Decree No. 27/2003/NĐ-CP dated March 18, 2003 of the Government guiding the implementation of the Law on Foreign Investment in Vietnam;

- Pursuant to Decree No. 48/2000/NĐ-CP dated September 12, 2000 of the Government detailing the implementation of the Petroleum Law;

- Pursuant to Decree No. 42/CP dated July 8, 1995 of the Government on the regulations for foreign law firms practicing in Vietnam;

The Ministry of Finance hereby provides guidelines for the implementation of accounting and auditing systems for enterprises and organizations with foreign investment operating in Vietnam, as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. The subjects to which this Circular applies include:

1.1. Enterprises and organizations with foreign direct investment; foreign partners in joint ventures under the Law on Foreign Investment in Vietnam;

1.2. Branches, foreign law firms operating in Vietnam according to the regulations for foreign law firms practicing in Vietnam; trading branches; organizations and individuals conducting exploration and exploitation of oil and gas according to the Petroleum Law.

1.3. Enterprises and organizations with foreign investment that are the permanent establishments of foreign companies located in Vietnam and other foreign organizations and individuals engaged in business activities in Vietnam not falling under the forms of investment stipulated in the Law on Foreign Investment in Vietnam.

2. All enterprises and organizations with foreign investment established and operating in Vietnam must comply with the Accounting Law and guiding documents of the Vietnamese Accounting Law; the organization of accounting work must comply with the principles, contents, methods of accounting, and methods of preparing and presenting financial statements as prescribed by accounting standards and the Vietnamese Enterprise Accounting System.

3. In cases where international treaties to which the Socialist Republic of Vietnam is a party provide different accounting provisions from those stipulated in the Accounting Law, accounting standards, and the Vietnamese Enterprise Accounting System, such provisions shall be applied in accordance with the provisions of the international treaty.

4. For enterprises and organizations with foreign investment, when applying the Vietnamese Enterprise Accounting System without the need for supplementation or modification, there is no requirement to register the accounting system applied with the Ministry of Finance.

In cases where enterprises and organizations with foreign investment require supplementation or modification when applying the Vietnamese Enterprise Accounting System as provided in Clause 1.1 Part II of this Circular, they must obtain written approval from the Ministry of Finance before implementation.

5. Annual financial reports of enterprises and organizations with foreign investment must be audited by a legally operating auditing firm in Vietnam before submission to the competent state authorities. The State encourages enterprises and organizations with foreign investment to conduct audits of their financial reports for tax purposes.

6. Enterprises and organizations with foreign investment must submit their annual audited financial reports to the local Tax Department, the agency issuing the investment license or operating permit, the Statistics Bureau, the Ministry of Finance, and the Vietnamese side contributing capital (if applicable). Enterprises and organizations with foreign investment whose headquarters are located in Export Processing Zones, Industrial Parks, or High-Tech Zones must submit their financial reports to the Management Board of the respective zones if required.

7. Enterprises and organizations with foreign investment must be subject to accounting inspections by financial agencies and functional management agencies in the implementation of accounting work in accordance with the Accounting Law, and such inspections shall not exceed once per fiscal year for the same content.

8. Enterprises and organizations with foreign investment must establish accounting departments, appoint or hire accountants, and appoint or hire chief accountants. In cases where a chief accountant has not been appointed or hired, a person responsible for accounting must be designated. The designation of a person responsible for accounting may only be implemented for a maximum period of one fiscal year, after which a chief accountant must be appointed or hired. The chief accountant or person responsible for accounting must meet the qualifications and conditions as prescribed by the Accounting Law and the Decree guiding its implementation.

The currency unit used in accounting is the Vietnamese Dong (symbol "đ" or VND in Vietnam). In cases where economic and financial transactions occur in foreign currencies, they must be recorded in both the original currency and Vietnamese Dong based on the actual exchange rate (determined based on the quoted exchange rates at foreign currency trading enterprises according to Vietnamese law) or the exchange rate published by the State Bank of Vietnam (inter-bank average exchange rate), except where otherwise provided by law.

In cases where a foreign currency does not have a direct exchange rate with the Vietnamese Dong, it must be converted through another foreign currency with an exchange rate against the Vietnamese Dong.

For enterprises and organizations with foreign investment primarily engaging in receipts and payments in foreign currencies, they may choose one foreign currency as the accounting currency unit and must obtain written approval from the Ministry of Finance before implementation. Enterprises and organizations with foreign investment must record accounting entries and prepare financial statements in the foreign currency approved by the Ministry of Finance as the accounting currency unit, while financial statements submitted to state management agencies with authority must be converted into Vietnamese Dong based on the prescribed exchange rate.

10. The language used in accounting shall be Vietnamese. In cases where foreign languages must be used on accounting vouchers, accounting books, and financial reports in Vietnam, both Vietnamese and the foreign language must be used simultaneously.

11. The numerals used in accounting shall be Arabic numerals: 0, 1, 2, 3, 4, 5, 6, 7, 8, 9; a period (.) shall be placed after thousands, millions, billions, ten billions, hundred billions, and trillion; a comma (,) shall be placed after the unit digit.

12. The accounting period for enterprises and organizations with foreign capital shall be regulated as follows:

12.1. The annual accounting period is twelve months from the beginning of January 1 to the end of December 31 of the Gregorian calendar year.

In cases where there are specific characteristics regarding organizational operations, enterprises and organizations may choose the annual accounting period as twelve full months according to the Gregorian calendar, starting from the first day of the first month of this quarter until the last day of the last month of the previous quarter of the following year, and must notify the local Tax Department.

After this Circular takes effect, enterprises and organizations that have registered an annual accounting period different from the above regulations must change their annual accounting period to comply with the provisions of this point.

12.2. For newly established entities, the first annual accounting period shall run from the date of issuance of the Investment License to the last day of the annual accounting period as stipulated in point 12.1 above.

12.3. In cases of division, separation, merger, consolidation, transformation, dissolution, cessation of operations, or bankruptcy, the final annual accounting period shall run from the start of the annual accounting period to the day before the effective date of the decision on division, separation, merger, consolidation, transformation of ownership form, dissolution, cessation of operations, or bankruptcy of the accounting entity.

12.4. In cases where the first annual accounting period or the final annual accounting period is shorter than ninety days, it is permissible to combine (+) with the next annual accounting period, or combine (+) with the previous annual accounting period to form one annual accounting period. The maximum duration of the first annual accounting period or the final annual accounting period is fifteen months.

13. Enterprises and organizations with foreign capital may select accounting software programs compatible with the Vietnamese Accounting System without having to register with the Ministry of Finance but must ensure compliance with the standards and conditions prescribed by the Ministry of Finance.

14. Enterprises and organizations with foreign capital must implement the storage of accounting records in accordance with the Accounting Law and the Government Decree guiding the implementation of the Accounting Law.

15. Enterprises and organizations with foreign capital must be subject to accounting inspections by state agencies with competent authority. In cases of administrative violations in the field of accounting, they will be punished in accordance with the provisions of Government Decree No. 185/2004/NĐ-CP dated November 4, 2004, on administrative penalties in the field of accounting.

II. SOME SPECIFIC PROVISIONS

1. Cases of supplementing and amending the accounting system must be approved by the Ministry of Finance.

1.1. Supplementing and amending the applied accounting system:

- Amending the content and structure of mandatory accounting voucher models;

- Supplementing or amending Level I or Level II accounts regarding name, code, and content, as well as methods of recording economic transactions;

- Amending the accounting book regarding content, sequence, and method of recording entries in the accounting book;

- Amending financial report indicators or changing the structure and method of preparing financial reports;

1.2. Using a currency other than the Vietnamese Dong in accounting;

1.3. Currently implementing the Vietnamese Accounting System and now need to supplement or amend as provided in point 1.1 of this section.

1.4. For enterprises and organizations that have been approved to implement an accounting system different from the Vietnamese enterprise accounting system and now wish to switch to applying the Vietnamese Accounting System with supplements and amendments as provided in point 1.1 of this section.

2. Documentation for supplementing and amending the accounting system

In cases of requesting to supplement or amend the applied accounting system, enterprises and organizations with foreign capital must prepare three (3) sets of documentation, each set including:

- A letter requesting to supplement or amend the accounting system (as specified in Appendix No. 01); letters approving the application of the accounting system previously issued by the Ministry of Finance (if any).

- A copy of the Investment License or Operating License;

- Documentation explaining the contents of the supplementary and amended accounting system. Enterprises and organizations must attach specific documents requested for supplementation or amendment such as accounting vouchers, accounting account systems, accounting book systems, accounting recording methods, financial reporting systems, along with sample forms and explanations of the supplementary and amended points.

Supplementary and amended accounting system documentation that meets the requirements will be stamped with confirmation by the Ministry of Finance before circulation:

- One set: To be kept at the Ministry of Finance (Accounting System and Audit Department);

- One set: To be kept at the local Tax Department;

- One set: To be kept at the enterprise or organization.

3. Time limit for response

- Within twenty days from the date of receipt of complete letters and supplementary and amended accounting system documentation from enterprises and organizations with foreign capital, the Ministry of Finance will issue a formal written response;

- In cases where the documentation of enterprises and organizations does not meet the requirements as stipulated in Section 2 Part II of this Circular, the Ministry of Finance will request enterprises and organizations to explain and supplement the documentation. The waiting time for enterprises and organizations to explain and supplement the documentation will not be counted towards the response deadline mentioned in this section.

III. IMPLEMENTATION

This Circular shall take effect fifteen days after its publication in the Official Gazette, replacing Circular No. 60 TC/CĐKT dated September 1, 1997, on Guidelines for Implementing Accounting and Auditing Work for Enterprises and Organizations with Foreign Investment in Vietnam, and Circular No. 155/1998/TT-BTC dated December 8, 1998, on Supplementing and Amending Circular No. 60 TC/CĐKT of the Ministry of Finance.

Any provisions contrary to those of this Circular shall be abolished.

During the implementation process, if there are difficulties or obstacles, please reflect them to the Ministry of Finance for research and resolution./.