Circular No. 15/TC-CN guiding the implementation of the capital preservation and development regime up to January 1, 1993 for state-owned enterprises

CIRCULAR

OF THE MINISTRY OF FINANCE

for use
implement the system of preserving and

developing capital up to January 1, 1993 for state-owned enterprises

Implementing Directive No. 138/CT dated April 25, 1991 on expanding the scope of granting usage rights and responsibility for preserving production and business capital to grassroots state-owned units and Decision No. 332/HĐBT dated October 23, 1991 of the Council of Ministers on preserving and developing business capital for state-owned enterprises, the Ministry of Finance has issued guiding documents:

Circular No. 31/TC-CN dated May 27, 1991 guiding the system of preserving and developing capital.

Circular No. 82/TC-CN dated December 31, 1991 guiding supplementary and amended provisions of Circular No. 31/TC-CN mentioned above;

Circular No. 05/TC-CNXD dated March 24, 1992 guiding specifically the determination of fixed capital and circulating capital that must be preserved at each state-owned enterprise as of January 1, 1992.

The content and method of determining the figures for preserving capital for state-owned enterprises still apply according to current regulations in the aforementioned documents.

This circular guides specifically the implementation of preserving and developing capital as of January 1, 1993.

I. ON PRESERVING FIXED CAPITAL

1. Fixed assets such as machinery and equipment, houses, warehouses, architectural structures that have been revalued to the point of January 1, 1992 according to the coefficients prescribed in Circular No. 05 TC/CNXD dated March 24, 1992 of the Ministry of Finance shall be applied with a capital preservation coefficient of 1 compared to the point of January 1, 1992 as of January 1, 1993.

However, for fixed assets during the year-end settlement of 1991 if there are cases where the coefficient was determined inaccurately, or the level of capital preservation was insufficient due to price fluctuations, etc., these now need to be reviewed and adjusted accurately.

2. In cases where the fixed assets, after applying a capital preservation coefficient of "1", have original prices not correctly calculated or the exchange rate did not increase but the original import price in foreign currency increased, they now must be adjusted based on current market prices for each specific case:

If it is imported machinery and equipment, then according to the current import price.

If it is domestically produced machinery and equipment, then according to the current price.

If it is houses, warehouses, architectural structures, then according to the current construction cost unit price in the country.

For houses and architectural structures used for commercial purposes with many advantages such as hotels, trade, tourism, etc., their value must be determined taking into account the advantageous factors and based on an acceptable price level.

The competent authorities responsible for allocating capital to enterprises and reviewing annual settlements for enterprises are the Ministry of Finance and the principal ministries (for central enterprises). Provincial Departments of Finance and provincial principal departments (for local enterprises) are responsible for determining and reviewing the aforementioned prices for enterprises during the annual settlement review period.

3. Circular No. 05 TC/CNXD stipulated the intangible depreciation coefficient as of January 1, 1992 to be from 0.5 to 0.9 for all types of fixed assets that were technologically outdated and unsuitable for the current price level. In 1992 (up to January 1, 1993), if there are cases continuing to be technologically outdated and requiring a price reduction, the intangible depreciation coefficient can only be applied up to 10%, i.e., the coefficient cannot be lower than 0.9.

The intangible depreciation of fixed assets of each state-owned enterprise must be reviewed and decided by the competent authorities reviewing the annual settlement based on the results of appraisal investigations and the enterprise's proposals.

II. ON CIRCULATING CAPITAL

Enterprises self-preserve circulating capital based on the actual increase in the value of circulating assets in stock at the time of price changes.

For imported raw materials and supplies, the price difference for preserving capital is determined based on the increase in the original import price (in foreign currency) and the increase (if any) in the foreign exchange rate used for imports.

For domestic raw materials and supplies, the price difference is determined based on the actual increase in the price of those materials at the time of price changes.

The circulating capital that must be preserved is determined as guided in Circular No. 31 TC/CN dated May 27, 1991 and Circular No. 82 TC/CN dated December 31, 1991 of the Ministry of Finance.

For circulating assets that previously had price increases and corresponding increases in circulating capital, if the price of inventory materials decreases now, generally, the corresponding capital will not be reduced to ensure that the enterprise can maintain and develop capital indirectly.

Only reduce the balance of the price difference account for materials and exchange rate differences (Account 65) if this balance was previously suspended pending a price decrease, or only reduce capital in cases where the selling price of finished products decreases significantly leading to losses and financial difficulties. Specific handling will be decided by the competent authorities reviewing the annual settlement of the enterprise.

III. IMPLEMENTATION

1. Principal ministries (Provincial principal departments for local enterprises) together with the Ministry of Finance (Provincial Department of Finance) review the fixed capital and circulating capital that must be preserved as of January 1, 1993 along with the annual settlement of 1992 for state-owned enterprises.

Management agencies and finance agencies need to dispatch specialized teams to audit settlement data and calculate the capital that must be preserved as of January 1, 1993 to submit to the competent authorities for formal approval.

The review of the capital preservation level along with the annual settlement of 1992 must be completed. Not later than July 1, 1993.

3. This circular takes effect from the date of issuance and applies to the review of the 1992 settlement and the preservation of capital from January 1, 1993.

Any provisions contrary to this circular are abolished.

During implementation, if there are difficulties, they should be reported promptly to the Ministry of Finance for resolution.