Circular No. 33/1998/TT-BTC guiding the accounting for provision establishment and utilization of inventory price reduction provisions, doubtful debt provisions, and securities price reduction provisions at state-owned enterprises.

CIRCULAR

Guidelines for accounting for the establishment and use of provisions for inventory write-downs, doubtful debts provision, and securities write-down provisions at state-owned enterprises.

provision for doubtful receivables, provision for decline in value of securities

at state-owned enterprises

Following Circular No. 64/TC-TCDN dated September 15, 1997 of the Minister of Finance on "Guidelines for the establishment and use of provisions for inventory write-downs, doubtful debts provision, and financial investment write-downs at state-owned enterprises," the Ministry of Finance provides methods for accounting for the establishment, reversal, and handling of provisions in enterprises as follows:

I. GENERAL PROVISIONS

1. The time for establishing and reversing provisions for inventory write-downs, doubtful debts provision, and securities write-downs shall be carried out at the end of the accounting period to prepare annual financial reports.

2. The amount of provisions already established shall be included in expenses at the end of the previous fiscal year and must be fully reversed at the end of the subsequent fiscal year. For provisions for material and goods inventory write-downs and doubtful debts provision, they shall be reversed into extraordinary income; provisions for securities write-downs shall be reversed into financial activity income.

3. The objects, conditions, levels of establishing provisions, and writing off uncollectible debts shall be implemented according to the regulations stipulated in Circular No. 64/TC-TCDN dated September 15, 1997 of the Ministry of Finance.

II. METHODS FOR ACCOUNTING FOR THE ESTABLISHMENT AND REVERSAL OF PROVISIONS.

1. Accounting for inventory write-down provisions:

At the end of the accounting period, the enterprise bases its calculations on the actual reduction in inventory quantities of each type of materials and goods, and determines the level of inventory write-down provisions to be established for the next accounting period, recording:

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

Credit Account 159 - Inventory Write-Down Provisions

At the end of the subsequent accounting period, the accountant records the full reversal of the previously established inventory write-down provisions into extraordinary income, recording:

Debit Account 159 - Inventory Write-Down Provisions Credit Account 721 - Extraordinary Income Items.

Simultaneously, determine the new level of inventory write-down provisions to be established for the next accounting period, recording:

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

Credit Account 159 - Inventory Write-Down Provisions.

2. Accounting for securities write-down provisions

At the end of the accounting period, the enterprise bases its calculations on the reduction in securities prices and existing securities types, and determines the level of securities write-down provisions to be established for the next accounting period, recording:

Debit Account 811 - Financial Activity Expenses

Credit Account 129 - Short-term Investment Write-Down Provisions

Credit Account 229 - Long-term Investment Write-Down Provisions

At the end of the subsequent accounting period, the accountant records the full reversal of the previously established securities write-down provisions into financial activity income, recording:

Debit Account 129 - Short-Term Investment Valuation Provisions

Debit Account 229 - Long-term Investment Write-Down Provisions Credit Account 711 - Financial Activity Income.

Simultaneously, determine the new level of securities write-down provisions to be established for the next accounting period, recording:

Credit Account 129 - Short-term Investment Write-Down Provisions Credit Account 229 - Long-term Investment Write-Down Provisions.

Debit Account 811 - Financial Activity Expenses

3. Accounting for doubtful debts provisions

3.1. Accounting for the establishment and reversal of doubtful debts provisions:

At the end of the accounting period, the enterprise bases its calculations on difficult-to-collect receivables and estimates potential losses that may occur in the planned year, determining the level of doubtful debts provisions to be established, recording:

Credit Account 139 - Doubtful Debts Provisions

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

At the end of the subsequent accounting period, the accountant reverses the previously established doubtful debts provisions into extraordinary income, recording:

Simultaneously, determine the new level of doubtful debts provisions to be established for the next accounting period, recording:

Debit Account 139 - Provision for Doubtful Receivables

Credit Account 721 - Unusual Income Items

3.2. Accounting for the write-off of difficult-to-collect receivables.

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

At the end of the subsequent accounting period, the accountant reverses the previously established doubtful debts provisions into extraordinary income, recording:

The write-off of difficult-to-collect receivables that cannot be collected must be based on the current financial regulations. Upon receiving permission to write off the debt, the accountant records:

Credit Account 138 - Other Receivables

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

Credit account 131 - Receivables from customers

Simultaneously record the debit side of Account 004 - Written-off Bad Debts.

For difficult-to-collect receivables that have been written off and subsequently recovered, the accountant records based on the actual value of the recovered debt, recording:

Credit Account 721 - Extraordinary Income

Debit Account 152 - Materials and Tools

Debit Account 112 - Bank Deposits

Simultaneously record the credit side of Account 004 - Written-off Bad Debts.

This circular takes effect fifteen days after signing. All provisions contrary to this circular are abolished.

III. IMPLEMENTATION PROVISIONS

During implementation, if there are any difficulties, enterprises should promptly report them to the Ministry of Finance for study and guidance on resolution./.

During implementation, if any issues arise, enterprises shall promptly report to the Ministry of Finance for study and guidance on resolution./.