Circular No. 14 TC/TNVT guides the implementation of Circular No. 67 - CT dated March 9, 1983 issued by the Council of Ministers.

CIRCULAR

GUIDANCE ON THE IMPLEMENTATION OF CIRCULAR 67-CT DATED MARCH 9, 1983 OF THE STATE COUNCIL

The State Council issued Circular No. 67/CT on March 9, 1983 to supplement Directive No. 316/TTg dated September 19, 1979 of the Prime Minister to accelerate the mobilization of stored materials for use. After reaching consensus with the State Bank, the Ministry of Finance provides guidance on certain financial aspects as follows:

I. CLASSIFICATION OF STORED MATERIALS WITH SLOW TURNOVER:

To have a basis for handling stored materials according to the spirit of Circular No. 67/CT, ministries and sectors shall base their classification on the inventory as of January 1, 1983, distinguishing the following three types of equipment and materials:

1. Equipment and materials within the reserve quota:

Decree No. 167/CT dated September 26, 1981 of the Prime Minister stipulates the reserve level based on the economic and technical characteristics of each type of material to determine the appropriate reserve period.

- Not exceeding three months for commercial and production units

- Not exceeding six months for supply units

- For specialized materials, the reserve level may be higher.

2. Stored equipment and materials: Directive No. 316/TTg defines stored equipment and materials as all types such as raw materials, materials, tools, spare parts, machinery belonging to current assets, fixed assets, and other sources of capital of administrative and public service sectors, national defense. These items are intact or partially used, still in good condition or deteriorated, without plans for use and supply in the current plan year or subsequent years, specifically:

- Equipment and materials that have deteriorated in quality

- Equipment and materials that are technologically obsolete or incompatible

- Equipment and materials reserved for more than two years.

3. Equipment and materials with slow turnover:

Equipment and materials reserved above the quota but not exceeding two years fall under the category of equipment and materials with slow turnover.

II. PRICES FOR TRANSFER AND SALE OF STORED EQUIPMENT AND MATERIALS WITH SLOW TURNOVER:

Circular No. 67/CT stipulates that prices for the transfer and sale of stored equipment and materials with slow turnover shall be based on Point 7 of Directive No. 316/TTg and new provisions in this circular, specifically:

1. For equipment and materials belonging to current assets.

a) Equipment and materials with slow turnover that must be distributed according to the state plan index or by order of the central ministry (for units under central management) or by order of the provincial People's Committee (for local units) shall be settled at the current wholesale price of materials.

b) Stored equipment and materials must distinguish specific cases as follows:

- Equipment and materials exceeding the reserve level for over two years but still in good condition must be sold at original price and distributed according to state orders; for equipment to be transferred to state reserves.

- Technologically obsolete, incompatible, or deteriorated equipment and materials must be handled specifically as follows:

+ If transferred and sold to state-owned enterprises, the director of the enterprise shall report to the General Director of the State-Owned Enterprises Union or the central ministry (if managed centrally) and the provincial People's Committee (if managed locally) for approval of the selling price for each type of equipment and materials or spare parts of each brand/model after considering the valuation committee's proposal. In cases where the selling price needs to be reduced by up to 50%, the decision shall be made by the central ministry after consultation with the Ministry of Finance and the State Bank (if the unit currently has loans from the bank for the storage of these types of equipment and materials).

+ If transferred and sold to collective economic units, a reduction of 20% or more must be approved by the central ministry after consultation with the Ministry of Finance and the State Bank (if the unit currently has loans from the bank for the storage of these types of equipment and materials).

2. For stored equipment belonging to fixed assets, it shall be handled according to Circular No. 260/TTg dated June 20, 1977 of the Prime Minister regarding the supplementation and amendment of some regulations on the management and accounting of fixed assets of state-owned enterprises (Part III on the transfer and sale of fixed assets between enterprises and economic organizations) and current regulations on the disposal of assets. The case of transferring fixed assets will be discussed in Part V.

III. DISPOSAL OF ASSETS:

- For obsolete or deteriorated spare parts and equipment (belonging to current assets and fixed assets that have been devalued and sold outside the state plan index after implementing measures such as advertising, display... but still unsold), the relevant units may organize repairs, improvements, dismantling for spare parts, raw materials sales to recover funds and must comply with the provisions in Directive No. 368/CT dated December 27, 1982 of the Chairman of the State Council on the recovery of scrap metals in the military, transportation sector, and localities, specifically:

a) Must follow the current asset disposal procedures.

b) Must prepare a project, detailing the recovered value, categorizing those that can be repaired for continued use or sold, or dismantled for accessories, components, or scrap metal including non-ferrous and ferrous metals.

c) The source of funds for dismantling, processing, and consuming scrap.

- If processed into new products, the cost shall be covered by working capital and recorded in the product cost. The minimum selling price must cover the production costs of the product.

- If converted into fixed assets for use, the development fund of the enterprise shall be used.

- If repaired for sale to supply agencies or sold to other units, the cost shall be covered by working capital and compensated by sales revenue.

d) If the proceeds from the disposal of assets (after deducting costs) reduce the asset value by 65% of its original price, the central ministry shall consult with the Ministry of Finance to resolve the issue.

IV. SETTLEMENT OF PRICE DIFFERENCES CAUSED BY THE TRANSFER AND SALE OF STORED EQUIPMENT AND MATERIALS AS CURRENT ASSETS:

According to Decision No. 177/CT dated September 29, 1981 and Decision No. 28/HĐBT dated February 19, 1982 of the State Council, from October 1, 1981, the wholesale price of materials was adjusted upward.

Part on the difference between old and new prices of some inventory materials and equipment (including surplus materials and equipment) that units have accounted for according to Circular No. 27 - LB/TT dated October 27, 1981, issued by the Ministry of Finance and State Bank. Therefore, the increase or decrease in price due to the consumption of surplus materials and equipment shall be handled as follows:

1. If the reduction reaches a level where the remaining price is only 1/10 of the price before October 1, 1981, then the price reduction difference shall be recorded as follows:

- For types of materials and equipment for which the State Budget has provided capital:

Debit 85 (85.2) "Basic Capital"

Credit 46 "Consumption"

- For types of materials and equipment for which the bank has provided 100% loans, the price reduction difference shall be recorded as follows:

Debit 93 "Bank Loan"

Credit 46 "Consumption"

- For types of materials and equipment for which the State Budget and the bank are currently providing capital and loans at the current ratio, if the price increase difference of existing inventory has been allocated according to the ratio of capital provision and loan, now the price reduction difference shall be recorded accordingly.

Debit 85 (85.2) "Basic Capital"

Debit 93 "Bank Loan"

Credit 46 "Consumption"

2. If the reduction is below the price before October 1, 1981:

- The price reduction difference up to the price before October 1, 1981, shall be recorded as instructed in point 1.

- The price difference between the price before October 1, 1981, and the actual selling price must be recorded as loss.

3. In cases where the selling price is higher than the current wholesale price of materials, the price difference shall be recorded as profit.

V. HANDLING OF SURPLUS MATERIALS AND EQUIPMENT THROUGH ASSET TRANSFER WITHOUT GOING THROUGH PURCHASE AND SALE:

For materials and equipment (including fixed assets), if the purchasing unit is a state-owned enterprise and the financial authority confirms that there is no payment source, the selling party shall handle the asset transfer to the purchasing party. Before the transfer, the selling party must re-evaluate the value of the surplus materials and equipment and report to the Ministry of Finance and State Bank (if it is a central unit) and report to the local Department of Finance and State Bank (if it is a local unit) so that the financial authority can process the reduction of self-owned capital for the transferring unit and the increase of capital for the receiving unit. The State Bank will process the reduction of loans for the transferring unit and the increase of loans for the receiving unit. The receiving unit is responsible for assuming and repaying debts to the State Bank according to the current credit regulations of the State Bank.

VI. ENCOURAGEMENT FOR HANDLING SURPLUS MATERIALS AND EQUIPMENT:

Article 4 of Circular No. 67/CT of the Council of Ministers stipulates the encouragement levels for units actively handling surplus materials and equipment. The Ministry of Finance specifies as follows:

1. Conditions for extraction:

- The management agency must assign consumption targets for surplus materials and equipment together with production, technical, and financial plans to the enterprises.

- Compliance with regulations on handling surplus materials and equipment.

2. Extraction rates:

- If a unit completes the consumption target for surplus materials and equipment, it may extract 1% of the proceeds from the sale of surplus materials and equipment. If not completed, it may extract 0.5% of the proceeds from the sale of surplus materials and equipment.

- If a unit exceeds the consumption target for surplus materials and equipment, the excess portion may be extracted at a rate of 5%.

- If a unit consumes obsolete materials and equipment with poor quality from before 1975, with a price reduction of 20% or less, it may extract 2% of the proceeds from the sale of such items. If there is no price reduction or if sold at a price higher than the current wholesale price of materials, it may extract 3% of the proceeds from the sale (the portion within the assigned target) and an additional 5% of the proceeds from the sale (the portion exceeding the target).

3. Principles for award extraction:

- Units consuming surplus materials and equipment through direct sales to consumers may extract awards for the surplus materials and equipment.

- Surplus materials and equipment resolved through asset transfer and capital adjustments shall not be eligible for awards.

- Surplus materials and equipment sold to circulation units with functions to trade surplus materials and equipment shall not be counted towards awards.

4. Distribution of the amount extracted as awards for the consumption of surplus materials and equipment:

60% to supplement the bonus fund

20% welfare fund

20% development incentive fund

The supplementary reward fund and welfare fund shall be funded by the proceeds from the sale of surplus equipment and materials, with each fund not exceeding two months' actual salary. Any excess amount shall be transferred to the production and business development incentive fund.

5. The bonus shall be deducted from the revenue generated from selling surplus equipment and materials.

VII. RESOLUTION OF SURPLUS EQUIPMENT AND MATERIALS, SLOW MOVEMENT ARISING FROM JANUARY 1, 1983:

- From January 1, 1983 onwards, if an entity causes the accumulation of surplus equipment and materials, the Bank will transfer the outstanding debt for such equipment and materials to overdue status.

All losses resulting from the consumption of these surplus equipment and materials must be recorded in profit and loss accounts.

- Domestic production materials or imported equipment (including equipment and materials imported before January 1, 1983 but for which the enterprise has not yet had funds to settle) if required to be stored within a period of twelve months (including the time for storing working capital quotas of the enterprise) shall be lent by the State Bank according to the current credit regulations at a level above the normal quota.

If, at the request of the State, it is necessary to store for more than twelve months but not exceeding twenty-four months, the State Bank shall use budget funds transferred over to provide special storage loans; if storage exceeds twenty-four months, the management agency of the enterprise must apply to the budget for special storage funds; Special storage funds must be tracked separately, recorded in account 85.3 "Special Funds," and must be repaid to the budget immediately after the consumption of surplus materials and equipment.