Joint Circular No. 17/2015/TTLT-BNNPTNT-BTC guides the method for determining the value of planted forests and orchards to reorganize, renew, and develop state-owned agricultural and forestry companies.

JOINT CIRCULAR

Guidelines for determining the value of planted forests and orchards to

 reorganize, renew, and develop, enhancing the efficiency of operations

of agricultural and forestry companies

_____________

On the basis of Decree No. 199/2013/NĐ-CP dated November 26, 2013 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Agriculture and Rural Development;

On the basis of Decree No. 215/2013/NĐ-CP dated December 23, 2013 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

On the basis of Decree No. 118/2014/NĐ-CP dated December 17, 2014 of the Government on reorganizing, renewing, and developing, enhancing the efficiency of operations of agricultural and forestry companies;

The Minister of Agriculture and Rural Development and the Minister of Finance issue this Joint Circular guiding the method for determining the value of planted forests and orchards to reorganize, renew, and develop, enhancing the operations of agricultural and forestry companies.

Article 1. Scope of Regulation

Article 1. This Circular guides the method for determining the value of production forests which are planted forests and orchards to implement the reorganization and conversion of agricultural and forestry companies; determining the value of planted forests and orchards on land when agricultural and forestry companies carry out the recovery of leased and borrowed land and transfer land back to localities according to Decree No. 118/2014/NĐ-CP dated December 17, 2014 of the Government on reorganizing, renewing, and developing, enhancing the efficiency of operations of agricultural and forestry companies (hereinafter referred to as Decree No. 118/2014/NĐ-CP).

Article 2. Orchards whose value is determined in this Circular include:

a) Rubber plantations;

b) Tea, coffee, cocoa plantations;

c) Cashew, fruit, nut plantations.

Article 2. Applicability

Article 3. Agricultural and forestry companies (hereinafter referred to as companies) shall implement reorganization and conversion according to Clause 2, Article 1 of Decree No. 118/2014/NĐ-CP.

Article 4. Organizations and individuals related to the reorganization, renewal, and development to enhance the efficiency of operations of agricultural and forestry companies.

Article 5. State-owned agricultural and forestry farms that have not yet been converted into single-member limited liability agricultural and forestry companies owned 100% by the state capital according to Decree No. 118/2014/NĐ-CP shall apply the provisions of this Circular.

Article 6. Principles for determining the value of planted forests and orchards

Clause 1. Determining the value of planted forests and orchards must ensure the accuracy and completeness of investment costs and future recovery values based on market prices and production and business advantages.

Clause 2. Determining the value of planted forests and orchards must be appropriate to the area, quantity, and quality; closely aligned with market prices at the time of valuation.

Clause 3. Determining the value of planted forests and orchards must ensure a balance of interests between the state, enterprises, investors, and workers in the enterprise.

Article 7. Classification of forests by periods

Companies base on the forest planting design approved by the competent authority to classify the age of forests by periods. In cases where there is no forest planting design or the forest planting design does not specify the ages of the periods, the following shall apply:

Clause 1. Forests in the basic construction period up to three years old.

Clause 2. Forests in the growth and development period from the end of the basic construction period to the technological maturity stage.

Clause 3. Technologically mature forests

a) For fast-growing tree species such as eucalyptus, acacia, tung oil, banyan, melaleuca, and other fast-growing species: seven years old and above.

b) For slow-growing tree species such as pine, teak, sao, oil, rosewood, mimosa, and other slow-growing species: twenty years old and above.

Clause 4. For mixed forests, determine according to the period of the main planted trees.

Article 5. Method for Determining the Value of Planted Forests during the Basic Construction Period

1. The value of forests during the basic construction period shall be determined according to the method of summing up the costs already invested plus the price adjustment value according to the following formula:

Where:

- Grcb: is the value of forests during the basic construction period.

- CPrcb: is the total cost already invested during the basic construction phase.

- CPIrcb: is the total price adjustment value of the investment cost.

2. CPrcb: is the total of all direct and indirect costs from preparation, planting, caring for, and protecting the forest until the time of determining the value, including:

a) Direct costs: actual costs incurred on accounting books for creating the forest (cost of tree seedlings; cost of materials; labor costs; cost of using equipment, machinery, and tools); forest protection costs (labor costs for protection; equipment costs; costs of facilities directly serving fire prevention; pest control costs).

b) Indirect costs: management, design, acceptance, inventory costs; taxes, fees; other allocated costs related to forest protection and firefighting.

c) Other costs (if any).

3. Determination of the total price adjustment value of the investment cost (CPIrcb)

a) The total price adjustment value of the investment cost (CPIrcb) is calculated as the sum of annual investment costs multiplied by the Consumer Price Index (CPI) from the year following the start of investment to the valuation date.

b) The Consumer Price Index (CPI) is the average annual Consumer Price Index of the whole country published annually by the General Statistics Office.

Article 6. Method for Determining the Value of Planted Forests during the Growth and Development Period

1. The value of planted forests during the growth and development period shall be determined according to the following formula:

Where:

- Grst: value of forests during the growth and development period;

- Grcb: value of forests during the basic construction phase;

- Grtt: value of forests at technological maturity age;

- Trtt: technological maturity age;

- Trcb: number of years during the basic construction phase;

- Ti: actual age of the forest area to be valued;

2. The value of forests at technological maturity age (Grtt) is the reference value of similar forest areas determined according to the market approach under the Vietnam Valuation Standard issued by the Ministry of Finance. In cases where the reference price cannot be determined, the value of forests during the growth and development period (Grst) shall be determined according to the guidance provided in Article 5 of this Circular. If there is insufficient information on the average annual Consumer Price Index, it shall be determined based on the average annual Consumer Price Index of the ten consecutive years closest to the valuation date.

Article 7. Determination of the Value of Planted Forests that Have Reached Technological Maturity

1. For planted forests in the technological maturity phase, the value shall be determined according to the following formula:

Grtt = Grcđ + Grmt

Where:

- Grtt: value of forests that have reached technological maturity;

- Grcđ: standing timber value;

- Grmt: value of forest environmental services (if applicable).

2. The standing timber value (Grcđ) is determined by multiplying yield with unit price.

a) Yield includes main forest products and secondary forest products determined by standing volume.

b) Standing timber price is the price of main forest products and secondary forest products determined according to the market approach under the Vietnam Valuation Standard issued by the Ministry of Finance or the price level set by the Provincial People's Committee at the time of valuation.

3. The value of forest environmental services (Grmt) shall be applied according to the provisions of Government Decree No. 99/2010/NĐ-CP dated September 24, 2010, regarding policies for paying for forest environmental services at the time of valuation.

Article 8. Determining the classification factor for rubber plantations

1. Classification factor for plantations

The basic classification factor for plantations (HSixdcb) is based on criteria regarding the density of grafted trees per hectare and the average trunk circumference; the business plantation classification factor (Hsikd) is based on criteria regarding the density of tapping trees, the condition of the tapping surface, and the quality of the tapped bark to evaluate and classify the plantation.

The actual classification factor for the plantation is determined based on inventory and assessment of the plantation's quality according to the classification criteria decided by the competent authority at the time of determining the value, specifically:

a) Classifying the area of rubber plantations by hectare (ha) and age of the plantation.

b) Classifying the area of plantations by investment form: New planting, replanting (newly planted rubber trees on land that has been liquidated).

c) Classifying rubber plantations into types A, B, C, D corresponding respectively with factors A = 1; B = 0.95; C = 0.9; D = 0.8.

2. Authority to decide classification criteria for plantations

a) The Board of Directors of the parent company of state economic groups and state-owned corporations decides the classification criteria applicable to companies held 100% by the parent company of state economic groups and state-owned corporations.

b) The Minister decides the classification criteria for companies 100% state-owned represented by the Ministry as the owner of state capital in enterprises.

c) The Chairman of the People's Committees of provinces and centrally governed cities decides the classification criteria for companies 100% state-owned represented by the People's Committees of provinces and centrally governed cities as the owner of state capital in enterprises.

Article 9. Determining the value of rubber plantations during the construction period

1. The value of rubber plantations during the construction period is determined according to the following formula:

Gixdcb = Dtxdcb x Siđt x HSixdcb

Where:

- Gixdcb: is the value of the rubber plantation construction period age i;

- Dtxdcb: is the area of the construction period plantation;

- Siđt: is the agricultural investment rate of the rubber plantation construction period age i;

- HSixdcb: is the classification factor for the rubber plantation construction period age i.

2. The agricultural investment rate of the rubber plantation Siđt includes: costs for clearing or rehabilitation; costs for establishing the plantation; costs for new planting; costs for caring for the plantation during the construction period and other construction costs prescribed by the competent authority under Clause 2, Article 8 of this Circular issued for each company at the time of determining the value.

Article 10. Determining the value of operating rubber plantations

1. The actual value of operating rubber plantations is determined for each hectare of plantation by age (i), specifically:

Gi kd = (Giclđc x HSikd) + Gihttl

Where:

- Gi kd: is the actual value of the hectare of plantation age i;

- Giclđc: is the adjusted remaining value of the plantation age i;

- HSikd: is the actual classification factor of the plantation age i;

- Gihttl is the present value of the liquidation value of the operating plantation age i.

2. Adjusted remaining value of the rubber plantation (Giclđc)

The adjusted remaining value of the rubber plantation age i = Revalued original cost of the plantation - Accumulated depreciation up to the valuation date, including:

a) Revalued original cost of the rubber plantation: Is determined according to the annual agricultural investment rate approved by the competent authority for the company or by region at the valuation date.

b) Accumulated depreciation: Calculated from the year the plantation begins exploitation to the valuation date based on the revalued original cost of the rubber plantation and the annual depreciation rate prescribed by the competent authority.

3. Present value of the liquidation value of operating rubber plantations (Gihttl):

Present value of the liquidation plantation:

Where:

a) D: Liquidation revenue of the plantation = Liquidation value/tree x Actual number of rubber trees liquidated x (1 - average breakage ratio)(n+m-i), where:

- Liquidation value/tree: Determined by the weighted average method over the three consecutive years prior to the valuation year, according to the formula:

In cases where the company does not have sufficient data for three consecutive years, the year without liquidation data will use the liquidation value/tree data of the nearest rubber company in the same province, if there are multiple companies, then use the data from the closest company based on district or provincial roads.

- Actual number of rubber trees liquidated: Is the number of rubber trees in the plantation at the valuation date.

- Average breakage ratio (broken trees/total effective trees): Based on actual statistics of each company over the three consecutive years prior to the valuation year (excluding trees broken or dead due to natural disasters such as typhoons, whirlwinds, fires, pests) with a maximum ratio not exceeding 1.5%.

b) P: Liquidation cost equal to 0.5% of liquidation revenue

c) T: Percentage of corporate income tax payable in the valuation year

d) 85%: Expected ratio reserved for dividend distribution from the income of liquidated rubber trees

đ) K: Discount rate or necessary return rate for investors when purchasing shares, calculated using the formula: K = Rf + Rp

e) Rf: Interest rate of government bonds with a 5-year term issued at the time closest to the time of enterprise shareholding.

g) Rp: Additional risk premium rate for investing in purchasing shares of companies in Vietnam, this indicator is determined based on international stock market risk premium indices.

h) i: is the actual age of the rubber plantation (if i ≥ 27, then calculate as 27)

i) m: is the number of years of plantation construction (7 years).

k) n: is the exploitation period of the rubber plantation (20 years).

4. Accounting for the present value of the liquidation value of operating rubber plantations: The present value of the liquidation value of operating rubber plantations will be recorded once in operating expenses at the time of liquidating the plantation.

Article 11. Determining the value of tea, coffee, and cocoa gardens during the basic construction period

1. The actual value of the basic construction garden is determined according to the formula:

Gxdcb = ∑ Dtixdcb x Siđt x HSixdcb

Where:

- Gixdcb: is the value of the basic construction garden;

- Dtixdcb: is the area of the basic construction garden age i;

- Siđt: is the agricultural investment rate of the basic construction garden age i;

- HSixdcb: is the actual classification coefficient of the basic construction garden age i;

2. The actual classification coefficient of the basic construction garden age i is based on the results of inventory, assessment, and classification of the garden into type A (good); B (average); C (poor), corresponding respectively with coefficient A equal to 1.2; B equal to 1; C equal to 0.8 according to the criteria for classifying gardens regarding tree height, trunk diameter, canopy diameter, number of primary branches, survival density, leaf color compared to technical standards specified by the competent authority according to age.

3. The agricultural investment rate of the garden age i (Siđt) and the criteria for classifying the garden are issued by the competent authority as stipulated in Clause 2 of Article 8 of this Circular.

Article 12. Determining the value of tea, coffee, and cocoa gardens for business operations

1. The actual value of the business operation garden is determined as follows:

Gkd = ∑ Gicl x Dtikd x HSipl x HSick x HSikv

Where:

- Gkd: is the value of the business operation garden;

- Gicl: is the remaining value after evaluation of 1 hectare of the business operation garden age i;

- Dtikd: is the area of the business operation garden age i;

- HSipl: is the actual classification coefficient of the business operation garden age i;

- HSick: is the exploitation cycle coefficient of the business operation garden age i;

- HSikv: is the regional coefficient of the business operation garden age i;

2. Determining the remaining value of 1 hectare:

a) The remaining value after re-evaluation of 1 hectare of the business operation garden age i is determined according to the following formula:

Where:

- Gicl: the remaining value of 1 hectare re-evaluated of the business operation garden age i;

- SĐTđg: the investment rate for 1 hectare of the garden at the year of re-evaluation is the investment rate for agricultural gardens according to age at the time of determining the value;

- Nicl: the remaining years of exploitation of the garden age i according to the cycle, calculated according to the following formula: Nicl = CK - Nkt;

+ CK: the number of years in the exploitation cycle of the business operation garden, issued by the competent authority;

+ Nkt: the number of years already exploited up to the year of re-evaluation.

b) In cases where the remaining value after re-evaluation of 1 hectare is lower than 20% of the investment rate for 1 hectare of the garden at the year of re-evaluation (SĐTđg), including cases where the garden has completed its exploitation cycle but continues to be exploited; the re-evaluated value of 1 hectare shall not be lower than 20% of the investment rate.

3. The actual classification coefficient of the garden age i (HSikd): is determined based on the inventory and assessment of the garden according to the criteria for classifying gardens into types A (good), B (average), C (poor), corresponding respectively with coefficient A equal to 1.2; B equal to 1; C equal to 0.8 according to the criteria for classifying gardens regarding survival ratio, shade trees, yield compared to standards specified by the competent authority.

4. The exploitation cycle coefficient of the garden (HSick) is determined as follows:

a) Exploitation cycle coefficient of Robusta coffee garden (30 years):

- From year 1 to year 5 and year 26 to year 30, coefficient 1.0;

- From year 6 to year 10 and year 21 to year 25, coefficient 1.1;

- From year 11 to year 20, coefficient 1.3;

b) Exploitation cycle coefficient of Arabica coffee garden and replanted Robusta coffee garden (20 years):

- From year 1 to year 3 and year 17 to year 20, coefficient 1.0;

- From year 4 to year 10, coefficient 1.1;

- From year 11 to year 16, coefficient 1.2;

c) The exploitation cycle coefficient of tea and cocoa gardens is established and issued by the Board of Directors/Chairman of the company after consulting the Ministry of Agriculture and Rural Development.

5. The regional coefficient (HSikv) is determined based on factors such as climate, soil, transportation (for transporting materials and products to processing facilities and consumption points), irrigation water supply, divided into three regions:

a) Region 1: favorable climate, soil, and transportation conditions, with over 80% self-sufficient water supply, coefficient 1.2;

b) Region 2: favorable climate, soil, and transportation conditions, with 50% to 80% self-sufficient water supply, coefficient 1.0;

c) Region 3: favorable climate, soil, and transportation conditions, with less than 50% self-sufficient water supply, coefficient 0.8.

6. The agricultural investment rate and the criteria for classifying the garden are issued by the competent authority as stipulated in Clause 2 of Article 8 of this Circular.

Article 13. Determining the value of cashew orchards, fruit trees, nut trees during the basic construction period

1. The actual value of the basic construction orchard is determined as follows:

Gxdcb = ∑ Dtixdcb x Sixdcb x HSixdcb

Where:

- Gxdcb is the value of the basic construction orchard;

- Dtixdcb is the area of the basic construction orchard age i;

- Sixdcb is the agricultural investment rate of the basic construction orchard age i;

- HSixdcb is the classification coefficient of the basic construction orchard age i;

2. The actual classification coefficient of the basic construction orchard age i (HSixdcb) is based on the results of inventory, assessment, and classification of the orchard according to type A (good); B (average), C (poor) corresponding respectively with coefficient A being 1.2; B being 1, C being 0.8 according to the criteria for classifying orchards regarding tree height, trunk diameter, canopy diameter, number of primary branches, density of living trees, leaf color compared to technical standards specified by the competent authority for each age.

3. The agricultural investment rate of the orchard age i (Sixdcb) and the criteria for classifying the orchard are issued by the competent authority as stipulated in Clause 2, Article 8 of this Circular.

Article 14. Determining the value of cashew orchards, fruit trees, nut trees not for business

1. The actual value of the business operation garden is determined as follows:

Gkd = ∑ Gicl x Dti x HSipl x HSick

Where:

- Gkd: is the value of the business operation garden;

- Gicl: is the remaining value after evaluation of 1 hectare of the business operation garden age i;

- Dti: the area of the business orchard age i;

- HSipl: is the actual classification coefficient of the business operation garden age i;

- HSick: is the exploitation cycle coefficient of the business operation garden age i;

2. The remaining value after revaluation of 1 hectare of the business orchard age i is determined by the following formula:

Where:

- Gicl: the remaining value of 1 hectare re-evaluated of the business operation garden age i;

- SĐTđg: the investment rate for 1 hectare of the orchard at the time of revaluation;

- Nicl: the remaining years of exploitation of the orchard age i according to the cycle, calculated by the following formula: Nicl = CK - Nkt;

+ CK: the number of years in the exploitation cycle of the business operation garden, issued by the competent authority;

+ Nkt: the number of years already exploited up to the year of re-evaluation.

3. The actual classification coefficient of the orchard age i (HSikd): is based on the criteria defined for density of trees, average yield, expected production to assess and classify the business orchard. The actual classification coefficient of the orchard is determined based on the inventory and assessment of the orchard according to the classification criteria for the orchard decided by the competent authority at the time of determining the enterprise value. Classify the area of the business orchard by hectare (ha) and age of the orchard; classify the orchard according to coefficient A, B, C corresponding respectively with coefficient A being 1.2, B being 1, C being 0.8.

4. The exploitation cycle coefficient of cashew orchards, fruit trees, nut trees is established and promulgated by the Board of Members/Company Chairman after consulting the Ministry of Agriculture and Rural Development.

5. The agricultural investment rate and the criteria for classifying the orchard are issued by the competent authority as stipulated in Clause 2, Article 8 of this Circular.

6. In cases of revaluation, the revalued value of 1 hectare of cashew orchards, fruit trees, nut trees shall not be lower than 20% of the investment rate.

Article 15. Handling some special cases

1. For planted forests, orchards that have been decided to liquidate by the competent authority but have not been processed until the time of organizing the determination of the enterprise value, the competent authority deciding the enterprise value for shareholding shall consider and decide to exclude them from the enterprise value. After announcing the enterprise value, the company is responsible for liquidation and handling according to the current financial management regulations. If the liquidation has not been completed by the time the company officially becomes a joint-stock company, it will be handled as follows:

a) In the case of planted forests, orchards awaiting liquidation on land areas belonging to the land use plan of the joint-stock company, the joint-stock company continues to manage and carry out the liquidation procedures. The money from the liquidation of planted forests, orchards, after deducting liquidation costs, the joint-stock company retains 10% and records it as other income. The remainder is handled as follows:

- Deposited into the Enterprise Restructuring Support Fund at the parent company of the economic group, state-owned corporation, parent company in the parent company - subsidiary combination when converting a limited liability company wholly owned by these enterprises into a joint-stock company.

- Deposited into the Enterprise Restructuring and Development Support Fund when converting a wholly state-owned limited liability company into a joint-stock company belonging to ministries, agencies equivalent to ministries, agencies under the Government, provincial People's Committees, centrally-administered municipalities.

b) In the case of planted forests, orchards awaiting liquidation on land areas not belonging to the land use plan of the joint-stock company, they are handed over to local authorities to carry out liquidation and land management according to the law.

2. For areas of orchards, planted forests where there is capital and labor contribution from the lessee as stipulated by the law on agricultural land lease and productive forest land lease, the company must determine the value invested by the lessee.

The determination of the invested value is based on the proportion of capital and labor contributions of each party as stipulated in the lease contract. The amount contributed by the lessee will be deducted from the product obligation that the lessee must pay according to the lease contract if the lessee continues to lease the orchard (only once); or when the lessee buys shares of the company, it will be deducted from the amount the lessee must pay to the company for purchasing shares (only once).

In the case where the lease contract stipulates that the lessee receives the value of the product upon harvest or exploitation corresponding to the invested capital and labor and 100% of the excess product value, the lessee shall not receive this amount.

3. For areas of orchards, planted forests that have been leased but the company does not directly plant, care for, manage, and protect but has invested capital, the value of the orchards, planted forests shall not be determined according to this Circular (regardless of whether the planted forest area lies on land managed by the company or land mortgaged by the lessee). The company's investments are recorded as receivables and recovered according to the agreement in the lease contract.

4. The additional value increase due to revaluation of orchards, planted forests (leased) of the enterprise when implementing the conversion of the enterprise into a joint-stock company is distributed as follows:

a) Where the company invests 100% of the capital and implements land lease according to the provisions of the law on agricultural land leasing and production forest land leasing, the additional value resulting from revaluation shall be included in the state capital value at the enterprise.

b) Where both the company and the lessee invest capital according to the provisions of the law on agricultural land leasing and production forest land leasing, the additional value shall be divided according to the ratio agreed upon in the land lease contract or according to the investment participation ratio of each party.

In the case where the land lease contract stipulates that the lessee receives the product value upon harvest or extraction corresponding to the invested capital and labor, and 100% of the product value exceeding the quota, division shall not be carried out.

5. For the area of land leased by the company where all establishment costs for the orchard, including planting, maintenance, management, and protection costs, are invested by the lessee, and the company only invests in infrastructure and other assets attached to the orchard, the company shall reassess the value of the infrastructure and other assets attached to the orchard according to the current regulations on asset valuation.

Article 16. Effective Date

1. This Circular takes effect from June 10, 2015.

2. This Circular replaces Circular No. 132/2011/TT-BTC dated September 28, 2011, issued by the Ministry of Finance, guiding the method for determining the value of rubber plantations when corporatizing; and Circular No. 55/2012/TT-BTC dated April 9, 2012, issued by the Ministry of Finance, guiding the method for determining the value of coffee plantations and tea gardens linked to processing facilities when corporatizing.

3. State-owned enterprises holding 100% of the charter capital that have planted forests and orchards when implementing restructuring and modernization shall apply this Circular to determine the value of planted forests and orchards when determining the enterprise value.

4. During the implementation process, if there are any difficulties, relevant agencies, organizations, and individuals shall promptly reflect them to the Ministry of Agriculture and Rural Development and the Ministry of Finance for guidance, research, amendment, and supplementation.