Circular No. 179/2012/TT-BTC on recording, evaluating, and handling foreign exchange rate differences in enterprises

✦ Tóm lược thông minh

Circular No. 179/2012/TT-BTC stipulates the recording, evaluation, and handling of foreign exchange rate differences in enterprises operating in Vietnam, excluding credit organizations. This circular guides the handling of foreign exchange rate differences during construction investment phases, production and business operations, liquidation, and the revaluation of foreign currency balances at the end of the accounting period.

Đối tượng áp dụng

Enterprises established and operating in Vietnam

Các điểm cốt lõi

Enterprises → must record, evaluate, and handle foreign exchange rate differences when settling monetary items with foreign currency origins based on actual exchange rates or the buying rates of commercial banks
During the construction investment phase: foreign exchange rate differences are cumulatively reflected on the Balance Sheet, and after completion and commissioning of the project, they will be gradually allocated to financial income or financial expenses over five years
During the production and business operation phase: foreign exchange rate differences are recorded as financial income or financial expenses within the fiscal year
During the liquidation phase: foreign exchange rate differences are recorded as liquidation income or liquidation expenses of the enterprise
At the end of the accounting period: enterprises must revalue foreign currency balances to "Vietnamese Dong" according to prescribed exchange rates, and foreign exchange rate differences are recorded as financial income or financial expenses

🌐 Tác động xã hội từ văn bản này

Positive impact: Helps enterprises manage foreign exchange risks more effectively, ensuring transparency in financial reports
Negative impact: Increases the workload for accounting tasks for enterprises, requiring a deep understanding of legal regulations

❓ Câu hỏi thường gặp

When must enterprises handle foreign exchange rate differences?

Enterprises must handle foreign exchange rate differences when settling monetary items with foreign currency origins, revaluing foreign currency balances at the end of the accounting period, and during construction investment phases, production and business operations, and liquidation.

How are foreign exchange rate differences handled?

During the construction investment phase, foreign exchange rate differences are cumulatively reflected on the Balance Sheet and allocated to financial income or financial expenses over five years. During the production and business operation phase, foreign exchange rate differences are recorded as financial income or financial expenses within the fiscal year.

Can enterprises distribute profits based on foreign exchange rate differences?

No, enterprises are not allowed to distribute profits or pay dividends based on gains from revaluating foreign currency balances at the end of the accounting period of monetary items with foreign currency origins.

From which fiscal year does this circular apply?

This circular applies from the fiscal year 2012.

Must enterprises that have revalued their foreign currency payable balances at the end of the year under the old circular take any action?

For enterprises that have revalued their foreign currency payable balances at the end of the year under Circular No. 201/2009/TT-BTC where the foreign exchange rate differences have not been fully allocated to expenses in the year, the remaining balance shall be further allocated to the financial expenses of the enterprise.

Toàn văn

CIRCULAR

Provisions on recording, evaluating, and handling foreign exchange rate differences in enterprises

_____________________________

Pursuant to the Enterprise Law 2005;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Considering the proposal of the Director of the Enterprise Finance Department,

The Minister of Finance issues this Circular to provide provisions on recording, evaluating, and handling foreign exchange rate differences in enterprises as follows:

Part A

GENERAL PROVISIONS

Article 1. Scope of Application and Regulatory Scope

1. Scope of application:

This Circular applies to enterprises established and operating in Vietnam in accordance with the law. This Circular does not apply to credit organizations established and operating under the Law on Credit Organizations.

For enterprises established based on agreements signed between the Government of the Socialist Republic of Vietnam and the Governments of other countries, if the agreement contains provisions on handling foreign exchange rate differences that differ from the guidance provided in this Circular, such enterprises shall implement the provisions of the agreement.

Article 2. Scope of Regulation

This Circular guides the recording, evaluation, and handling of foreign exchange rate differences and the conversion of financial reports of overseas operations and overseas establishments of enterprises into the accounting currency of Vietnamese enterprises.

Determining income and deductible expenses when determining corporate income tax for foreign exchange rate differences in enterprises shall be carried out in accordance with the provisions of the laws on corporate income tax.

Article 2. Interpretation of Terms

The terms used in this Circular are understood as follows:

1. "Foreign currency" means a monetary unit different from the accounting currency of an enterprise.

2. "Foreign currency transactions" are receipts and payments in foreign currency and pricing activities.

3. "Exchange rate" refers to the ratio of exchange between two monetary units (hereinafter referred to as the exchange rate).

4. "Foreign exchange rate difference" is the difference arising from the actual exchange or revaluation of the same amount of foreign currency into the accounting currency at different exchange rates (hereinafter referred to as the exchange rate difference).

5. "Foreign currency monetary items" are current cash and cash equivalents, receivables, or payables in a fixed or determinable amount, specifically including:

- Cash or cash equivalents in foreign currency.

- Receivables and payables in foreign currency, except:

+ Advance payments to suppliers in foreign currency and advance expenses in foreign currency.

+ Advance revenues received in foreign currency and advance expenses in foreign currency.

- Deposits, collateral, or guarantees in cash or cash equivalents in foreign currency that can be reclaimed, and deposits, collateral, or guarantees in cash or cash equivalents in foreign currency that must be refunded.

- Loans, advances, or deposits in foreign currency.

6. "Overseas operations" are branches, subsidiaries, associated companies, joint ventures, business collaborations, and other related business activities of the reporting enterprise that operate outside the territory of Vietnam.

7. "Overseas establishment" is an overseas operation where its activities constitute an independent part of the reporting enterprise.

Article 3. Exchange Rate for Converting Foreign Currency into "Vietnamese Dong"

1. For settlements of foreign currency monetary items arising during the fiscal year, it shall be conducted according to the actual exchange rate at the time of the foreign currency transaction at the Commercial Bank where the enterprise has transactions, as stipulated by law.

2. For revaluation of the end-of-period foreign currency balance, it shall be conducted according to the buying rate of the Commercial Bank where the enterprise maintains an account, published at the time of preparing the financial report.

Article 4. For foreign currencies for which the State Bank of Vietnam has not announced exchange rates to convert into "Vietnamese Dong"

1. In cases where enterprises open accounts at commercial banks that have announced exchange rates for such foreign currency, the conversion shall be carried out according to the transaction exchange rate of the commercial bank where the enterprise opens its account at the time of re-evaluating the end-of-period balances of monetary items with foreign currency origins.

2. In cases where enterprises open accounts at multiple commercial banks that have announced exchange rates for such foreign currency, the conversion shall be carried out according to the average transaction exchange rate of the commercial banks where the enterprise opens its accounts at the time of re-evaluating the end-of-period balances of monetary items with foreign currency origins.

3. In cases where the commercial bank where the enterprise opens its account does not announce the exchange rate for such foreign currency, the conversion shall be carried out through the exchange rate of certain major foreign currency units that the State Bank of Vietnam announces based on the average transaction exchange rate of banks at the time of re-evaluating the end-of-period balances of monetary items with foreign currency origins.

Part B

SPECIFIC PROVISIONS

Article 5. Handling exchange rate differences arising during the construction investment phase to form fixed assets of newly established enterprises that have not commenced operations

During the construction investment phase to form fixed assets of newly established enterprises that have not commenced operations, exchange rate differences arising from payments for monetary items with foreign currency origins to implement construction investments and exchange rate differences arising from re-evaluating monetary items with foreign currency origins at the end of the fiscal year are reflected cumulatively and separately on the Balance Sheet. When fixed assets are completed and put into use, the exchange rate differences arising during the construction investment phase (after offsetting increases and decreases) will be gradually allocated to financial income or financial expenses over a period not exceeding five years from the date the project is put into operation.

Article 6. Handling exchange rate differences during the operational production and business period of enterprises

During the production and business phase, including construction investment to form fixed assets of operating enterprises, exchange rate differences arising from transactions in foreign currency of monetary items with foreign currency origins will be recorded as financial income or financial expenses in the fiscal year.

Article 7. Handling exchange rate differences during the liquidation and dissolution period of enterprises

During the liquidation and dissolution period of enterprises, exchange rate differences arising from transactions in foreign currency of monetary items with foreign currency origins will be recorded as liquidation income or liquidation expenses of the enterprise.

Article 8. Handling exchange rate differences due to re-evaluation of foreign currency balances at the end of the accounting period (quarterly, semi-annually, annually)

1. At the end of the accounting period, enterprises must re-evaluate cash, deposits, funds in transit, receivables, payables with foreign currency origins into "Vietnamese Dong" according to the exchange rates stipulated in Articles 3 and 4 of this Circular. The remaining exchange rate differences arising from the re-evaluation of end-of-period balances, after offsetting increases and decreases, shall be recorded as financial income or financial expenses in the period.

2. Enterprises may not distribute profits or pay dividends based on exchange rate differences resulting from the re-evaluation of foreign currency balances at the end of the accounting period of monetary items with foreign currency origins.

Article 9. Handling exchange rate differences when consolidating financial reports of activities and overseas entities into the financial report of the enterprise

1. Exchange rate differences arising from converting the financial reports of overseas activities into the accounting currency of Vietnamese enterprises shall be recorded as financial income or financial expenses of the enterprise.

2. Exchange rate differences arising from converting the financial reports of overseas entities into the accounting currency of Vietnamese enterprises shall be cumulatively reflected separately on the Balance Sheet until the liquidation of the overseas entity, at which time the exchange rate differences shall be recorded as financial income or financial expenses of the enterprise.

The recording of exchange rate differences from Article 5 to Article 9 above shall be carried out in accordance with the current accounting regulations.

Part C

TRANSITIONAL PROVISIONS

Article 10. Transitional Provisions

For enterprises that have revalued their foreign currency payable balances at year-end according to Circular No. 201/2009/TT-BTC dated October 15, 2009 of the Ministry of Finance, where the unallocated increase in exchange rate differences has not been fully allocated to expenses for the year, the remaining balance shall be further allocated to the enterprise's financial expenses over the remaining years from the date this Circular takes effect.

Part D

IMPLEMENTATION

Article 11. Implementation Provisions

This Circular takes effect from December 10, 2012, applicable from the fiscal year 2012 and replaces Circular No. 201/2009/TT-BTC dated October 15, 2009 of the Ministry of Finance regarding guidance on handling exchange rate differences in enterprises.

During implementation, if there are difficulties or obstacles, units are requested to promptly reflect them to the Ministry of Finance for consideration and resolution./.