Circular No. 21/1998/TT-BTC guiding the work of preparing and inspecting financial reports for state-owned enterprises in 1997

 CIRCULAR

Guidelines for the preparation and inspection of financial reports

for state-owned enterprises in 1997

The Ministry of Finance has issued Decision No. 1141/TC/QĐ/CĐKT on November 1, 1995 and Circular No. 73 TC/TCDN on November 12, 1996 guiding the work of preparing, publicly disclosing, and inspecting financial reports and accounting inspections of state-owned enterprises. State-owned enterprises, independent member enterprises, and centralized accounting units of state-owned holding companies must organize the preparation of financial reports, public disclosure of finances, and accounting inspections according to the above regulations. To implement these regulations effectively and in line with the current situation of state-owned enterprises, the Ministry of Finance supplements some points in the work of preparing and inspecting financial reports of state-owned enterprises in 1997 as follows:

I. THE PREPARATION OF FINANCIAL REPORTS

1. When preparing financial reports for 1997, the following issues should be noted:

1.1. Enterprises shall implement depreciation at levels registered with the state capital and asset management agencies at their enterprises. Enterprises that have reported and been approved by the Ministry of Finance to apply depreciation outside the time frame specified in Decision No. 1062/TC/QĐ/CĐKT dated November 14, 1996 shall follow the approved level. From the settlement of 1997 onwards, the Ministry of Finance will not consider increases or decreases in depreciation outside the levels registered by the enterprise.

1.2. Regarding wages: Implement as prescribed in Decree No. 28/CP dated March 28, 1997 of the Government and Circular No. 13/LĐTBXH-TT dated April 10, 1997 of the Ministry of Labor, War Invalids and Social Affairs. In cases where the wage rate has not been approved by December 31, 1997, the wage fund of the enterprise shall be determined according to the provisions in item c point 2 section C part IV of the aforementioned Circular No. 13/LĐTBXH-TT.

1.3. Exchange rate differences shall be handled as prescribed in Circular No. 44 TC/TCDN dated July 8, 1997 of the Ministry of Finance.

1.4. The establishment of provisions for inventory write-downs, doubtful debts, and securities write-downs shall be carried out as prescribed in Circular No. 64 TC/TCDN dated September 15, 1997 of the Ministry of Finance. The objects, conditions, and methods of establishing provisions must comply with the regulations. For large quantities of auxiliary materials with high value and goods with poor quality that have not yet been processed also fall within the scope of establishing provisions.

State-owned enterprises engaged in public services are not subject to the provisions established under Circular No. 64 TC/TCDN mentioned above, but if they have business operations, raw materials, supplies, and inventory of goods, and difficult-to-collect receivables of such operations also fall within the scope of establishing provisions if the prescribed conditions and systems are met.

1.5. Revenue from the use of state budget funds shall be implemented according to the guidelines in Circular No. 33 TC/TCT dated June 15, 1997 and Circular No. 4378 TC/TCDN dated December 8, 1997 of the Ministry of Finance.

1.6. The establishment of enterprise funds shall be carried out according to Clause 5 and Clause 6 of Article 32 of the Financial Management and Business Accounting Regulations for State-Owned Enterprises issued together with Decree No. 59/CP dated October 3, 1996 of the Government and Circular No. 70 TC/TCDN dated November 5, 1996 of the Ministry of Finance. Wages shall serve as the basis for determining the maximum limit of the two reward and welfare funds as stipulated in point 1.2 above.

2. Issues related to auditing financial reports: On October 28, 1997, the Ministry of Finance issued Decision No. 832 TC/QĐ-CĐKT promulgating the Internal Audit Regulation. According to this regulation, annual financial reports of enterprises must be accompanied by internal audit reports. Circular No. 73 TC/TCDN also stipulates that financial reports must be confirmed by internal auditors or independent auditors. However, the newly issued internal audit regulation, enterprises have not yet established internal audit organizations. Therefore, the preparation, public disclosure, and submission of financial reports for 1997 by enterprises do not necessarily need to go through internal audits or independent audits and confirmation by such organizations. The General Director and Chief Accountant are fully responsible for the accuracy and truthfulness of the financial report. Starting from 1998, enterprises must organize and implement internal audits or audits according to the regulations.

3. Time and place for submitting financial reports:

3.1. Independent state-owned enterprises, independent member enterprises, and centralized accounting units of state-owned holding companies must complete and submit financial reports to relevant state agencies before February 15, 1998, according to the address specified in Decision No. 1141 TC/QĐ/CĐKT mentioned above.

3.2. State-owned holding companies must review and consolidate the financial reports of their member units and submit them to the following agencies before March 1, 1998:

- State Capital and Asset Management Agency at Enterprises.

- General Department of Taxation.

- The agency deciding the establishment of the enterprise.

For state-owned holding companies established by provincial and municipal People's Committees pursuant to the delegation of the Government, and centralized accounting holding companies, they must also submit their annual financial reports to the State Capital and Asset Management Agency at Enterprises where the holding company is headquartered for consolidation by region.

The consolidated report of state-owned holding companies must separately analyze the number of enterprises in loss and total losses, the number of profitable enterprises and total profits.

3.3. Dependent enterprises when submitting financial reports to higher authorities must simultaneously send them to the State Capital and Asset Management Agency at Enterprises and the Tax Bureau where the enterprise is headquartered.

4. Public disclosure of financial information by enterprises shall be carried out in accordance with the provisions of Circular No. 73 TC/TCDN dated November 12, 1996.

5. The State Capital and Asset Management General Department at enterprises must direct and evaluate the financial statements of each state-owned enterprise, and compile them according to each locality, each sector, and nationwide. Financial statement compilations for state-owned enterprises in each locality must be sent to the Chairmen of the People's Committees of provinces and centrally-administered cities; compilations of financial statements of enterprises under ministries and sectors must be sent to the heads of ministries and sectors before May 30, 1998. Nationwide compilations of financial statements of state-owned enterprises must be completed before June 30, 1998, for the Ministry of Finance to report to the Government.

II. THE INSPECTION OF ENTERPRISE FINANCIAL STATEMENTS

Inspecting the financial statements of state-owned enterprises is a regular task of the state capital and asset management agency at enterprises. Depending on the strength and financial operation situation of the enterprises, comprehensive inspections or specialized inspections may be organized. First and foremost, focus should be placed on poorly performing enterprises with signs of significant asset and capital losses, and those enterprises that have lost their ability to pay debts to clarify these issues. An inspection conclusion must be made for each inspected enterprise. The inspection record must be sent to the agency that established the enterprise along with any recommendations (if applicable). If multiple agencies inspect the same issue and reach different conclusions, the state capital and asset management agency shall report to the Ministry of Finance for resolution. Quarterly, the State Capital and Asset Management General Department at enterprises compiles reports to the Ministry of Finance on the results of inspecting the financial statements of state-owned enterprises. To avoid inconvenience for enterprises, the state capital and asset management agency at enterprises shall proactively coordinate with relevant agencies to avoid overlapping or repetitive inspections, or conducting multiple inspections of an enterprise within a year.

III. RESPONSIBILITY REGIME

1. For state-owned enterprises:

Failure to submit financial statements to state agencies as prescribed will result in administrative penalties pursuant to point b, Clause 3, Article 2 of Decree No. 22/CP dated April 17, 1996 of the Government and point 1.4, Section II of Circular No. 45 TC/TCT dated August 1, 1996 of the Ministry of Finance.

2. State capital and asset management agencies at enterprises:

2.1. Guide and urge enterprises to prepare financial statements in accordance with regulations and ensure compliance with prescribed deadlines.

2.2. Compile financial statements of enterprises, analyze and assess business operations and financial management of state-owned enterprises, and report to the Chairmen of the People's Committees of provinces and centrally-administered cities, heads of central ministries and sectors, and the Ministry of Finance.

2.3. Organize inspections of state-owned enterprises' financial statements in accordance with the spirit above. Quarterly, compile reports on inspection results to the Ministry of Finance.

2.4. If inspections are not conducted, or if inspections fail to detect or timely report situations of losses, capital loss, or inability to pay debts of enterprises; during the inspection process, if there are acts of harassment, causing inconvenience, affecting the business operations of enterprises, or failing to timely compile financial statements, the officers assigned to monitor enterprises and related organizations will be disciplined according to the degree of violation.

3. Tax authorities:

3.1. Timely notify enterprises when they fail to submit financial statements to state agencies within the prescribed deadline.

3.2. Issue decisions on administrative penalties against enterprises in accordance with Decree No. 22/CP and Circular No. 45 TC/TCT after two notifications urging submission of financial statements remain unheeded.

3.3. If timely notification to urge enterprises to submit financial statements is not provided, or if administrative penalty decisions are not issued against enterprises that fail to submit financial statements, disciplinary action will be taken depending on the degree of violation.

1. This Circular takes effect from January 1, 1998.

2. State-owned enterprises, the State Capital and Asset Management General Department at enterprises, and the State Tax General Department shall organize the implementation of this Circular. Any difficulties encountered during implementation should be promptly reported to the Ministry of Finance for study and resolution.