Circular No. 23/1999/TT-BTC guiding the preparation and inspection of financial statements for the year 1998 of state-owned enterprises

CIRCULAR

Guidelines for the preparation and inspection of financial reports for the year 1998 of state-owned enterprises

of state-owned enterprises

The Ministry of Finance has issued Decision No. 1141/TC/QĐ/CĐKT dated November 1, 1995 on Accounting Regulations for Enterprises, Circular No. 73 TC/TCDN dated November 12, 1996 guiding the preparation, public disclosure, and inspection of financial reports and accounting of state-owned enterprises. In principle, state-owned enterprises must comply with these documents.

To adapt to actual conditions, the Ministry of Finance provides guidance to amend and supplement certain points regarding the preparation and inspection of financial reports applicable for the year 1998 as follows:

1. On depreciation of fixed assets

1.1. Enterprises that have registered the usage period of fixed assets with the State Capital and Asset Management Agency at the enterprise or have been approved by the Ministry of Finance to depreciate outside the prescribed time frame under Decision No. 1062/TC/QĐ/CSTC dated November 14, 1996 of the Ministry of Finance shall implement according to the level already registered or approved.

1.2. For newly invested or purchased fixed assets during the year which have not registered the usage period with the State Capital and Asset Management Agency at the enterprise, in 1998, the enterprise shall depreciate within the usage period specified in the aforementioned Decision.

1.3. In cases where enterprises increase or decrease the depreciation rate of fixed assets not in accordance with the registered or approved usage period to create funds to repay investment loans (or to reduce losses), they shall be handled as follows:

- Enterprises may depreciate at a higher rate than the registered or approved rate to repay investment loans but shall not exceed the minimum usage period within the depreciation range and shall not exceed the shortfall in loan repayment sources according to the agreement.

- They may adjust the depreciation rate downward but shall not fall below the maximum usage period within the prescribed depreciation range and shall not exceed the amount of incurred losses. That means enterprises shall not reduce depreciation to create fictitious profits and shall not meet the conditions to recover investment capital.

Enterprises shall notify the adjustment of increased or decreased depreciation rates to the State Capital and Asset Management Agency at the enterprise and the Tax Bureau for supervision.

Any increases or decreases in depreciation outside the range stipulated in Decision No. 1062/TC/QĐ/CSTC must have the approval of the Ministry of Finance.

2. On wages

The settlement of wage funds shall be accounted for as actual expenses in accordance with Decree No. 28/CP dated March 28, 1997 of the Government; Circular No. 13/LĐTBXH-TT dated April 10, 1997 of the Ministry of Labor, Invalids and Social Affairs guiding methods for building unit wage prices and managing wages and income in state-owned enterprises; Joint Circular No. 18/1998/TTLT-BLĐTBXH-BTC dated December 31, 1998 of the Ministry of Labor, Invalids and Social Affairs and the Ministry of Finance guiding when enterprises fail to meet budget contribution and profit targets; Decision No. 1069/1998/QĐ-LĐTBXH dated October 14, 1998 of the Ministry of Labor, Invalids and Social Affairs announcing the average wage level for state-owned enterprises in 1998.

3. Exchange rate accounting and handling exchange rate differences

Economic transactions denominated in foreign currencies shall be converted into Vietnamese Dong according to current regulations.

Handling of exchange rate differences shall, in principle, be carried out in accordance with Circular No. 44 TC/TCDN dated July 8, 1997 of the Ministry of Finance. In cases where the entire exchange rate difference resulting from revaluation of long-term debt balances payable in foreign currency is accounted for as expenses in 1998 and results in a loss, the enterprise may transfer a portion of the exchange rate difference equivalent to the loss incurred in 1998 to the following year. Handling of exchange rate differences shall be conducted after adjusting depreciation according to Point 1.3 above. Special cases shall be handled according to the approved document of the Ministry of Finance.

4. On supplementary tax income

Implementation shall follow Circular No. 48/1998/TT-BTC dated April 11, 1998 of the Ministry of Finance.

5. Preparation and submission of financial reports

Independent state-owned enterprises, member enterprises of State-owned Holding Companies operating independently, and centralized accounting portions of State-owned Holding Companies shall prepare and submit financial reports to relevant government agencies in accordance with Decision No. 1141TC/QĐ/CĐKT dated January 1, 1995 of the Ministry of Finance.

State-owned Holding Companies shall aggregate and submit comprehensive financial reports to the following agencies:

- State Capital and Asset Management General Department at enterprises;

- State Tax General Department;

- The agency deciding the establishment of the enterprise.

For State-owned Holding Companies established by Provincial People's Committees under the delegation of the Government and centralized accounting Holding Companies, they must also submit annual financial reports to the State Capital and Asset Management Agency at the enterprise where the Holding Company is headquartered for consolidation of financial reports by province or city.

The consolidated report of State-owned Holding Companies shall be prepared according to the model specified in Decision No. 1141/TC/QĐ/CĐKT but must separately analyze the number of loss-making enterprises and total losses, the number of profitable enterprises and total profits (without offsetting between profit-making and loss-making units).

When dependent enterprises submit financial reports to their superiors, they must simultaneously submit them to the State Capital and Asset Management Agency at the enterprise and the Tax Bureau where the enterprise is headquartered.

Enterprises with internal audit organizations must have their 1998 financial reports confirmed by internal auditors before submitting them to government management agencies and publicly disclosing financial information in accordance with current regulations. For enterprises without internal audit organizations, such confirmation is not mandatory. In necessary cases, enterprises may invite independent auditors to audit and confirm their financial reports.

Enterprises that delay in submitting financial reports will be subject to administrative penalties as stipulated in 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.

The General Director (or Director) and the Chief Accountant of the enterprise shall be responsible to the State and the law for the accuracy and correctness of the figures in the financial reports of the enterprise.

6/ Financial report inspection work

6.1 Inspection of financial reports

The inspection of financial reports of enterprises shall be carried out in accordance with the provisions of Decree No. 61/1998/NĐ-CP dated August 15, 1998 of the Government on inspection and supervision work for enterprises and Decision No. 1840/1998/QĐ-BTC dated December 15, 1998 of the Minister of Finance on the issuance of regulations to eliminate overlapping between inspection agencies of the Ministry of Finance regarding enterprises.

Based on the financial reports prepared by the enterprise, the state capital and asset management agency at the enterprise shall examine the level of preservation and growth of capital, business results, and the ability to repay debts of state-owned enterprises; review the distribution and use of post-tax profits; the establishment and use of funds in enterprises according to current regulations.

Depending on the capacity and financial operation situation of the enterprise, comprehensive inspections or specialized inspections may be organized for certain key independent state-owned enterprises.

After completing the inspection, a conclusion in writing about the inspected content must be made. The person directly conducting the inspection must sign the minutes and bear responsibility within the scope of the inspected figures.

For state-owned enterprises with serious financial issues that cannot organize inspections, the state capital and asset management agency at the enterprise may recommend financial audits or request the enterprise to invite independent auditing organizations to audit the financial reports of the enterprise. The cost of hiring independent auditors shall be recorded as part of the enterprise's management expenses. Independent auditing organizations shall be responsible under the law for the figures they have audited.

For public service enterprises: The agency deciding to establish the enterprise shall take the lead and coordinate with the state capital and asset management agency at the enterprise to organize the approval of the annual financial report of the enterprise in accordance with Circular No. 06 TC/TCDN dated February 24, 1997 of the Ministry of Finance guiding the financial management system for state-owned enterprises engaged in public services and other circulars guiding specific industries.

6.2 Consolidation and evaluation of enterprise financial reports

Based on the financial reports of the enterprise, the state capital and asset management agency at the enterprise has the duty to evaluate, analyze, and consolidate the business efficiency; the degree of preservation of state capital; the ability to repay debts; the distribution and use of post-tax profits; the establishment and use of funds of all state-owned enterprises.

The Departments of state capital and asset management at enterprises are responsible for consolidating and evaluating the financial reports of all state-owned enterprises under their management jurisdiction.

The General Department of state capital and asset management at enterprises is responsible for consolidating and evaluating financial reports by economic sector (Industry, Construction, Agriculture and Rural Development, Transportation, Trade, Tourism...) and state-owned corporations (Corporation 90, Corporation 91) established by the Prime Minister or relevant Ministries.

When evaluating and consolidating, it is necessary to distinguish separately:

- Enterprises operating profitably, total profits, loss-making enterprises, total losses (without offsetting profitable enterprises and loss-making enterprises). Profit margin on state capital (shareholders' equity).

- Enterprises preserving and developing capital and enterprises unable to preserve capital. Total actual capital losses due to business losses, accumulated losses, asset depreciation, non-collectible debts, unrecoverable investment costs, and other losses.

- Debts: Tax debts, domestic and foreign bank debts, investor debts, customer debts, employee debts, and other debts. Especially, the ability to repay debts and reasons for inability to repay debts must be evaluated.

The Departments of state capital and asset management at enterprises prepare consolidated evaluation reports with analysis by economic sector and send them to the Ministry of Finance (General Department of state capital and asset management at enterprises) and send them to the Provincial Department of Finance and People's Committee of the province. Consolidated reports and evaluations by sector are sent to related provincial departments before May 31, 1999.

The General Department of state capital and asset management at enterprises prepares consolidated evaluation reports of financial statements of state-owned enterprises in various economic sectors (Industry, Construction, Agriculture and Rural Development, Trade, Tourism, Transportation) and sends them to the relevant ministries managing these sectors before June 30, 1999.

A consolidated evaluation report of national state-owned enterprise financial statements shall be reported to the Minister of Finance before June 30, 1999.

The Departments of state capital and asset management at enterprises continue to classify enterprises in 1998 according to Directive No. 868/1998/CT-BTC dated March 26, 1998 of the Minister of Finance. For enterprises operating effectively, they must have been profitable continuously for three years or more.

This Circular applies to the preparation, inspection, and handling of the 1998 financial reports of state-owned enterprises.

During implementation, if there are difficulties, agencies and enterprises should promptly reflect them to the Ministry of Finance for research and resolution.