Circular No. 44-TC/TCDN guides the handling of exchange rate discrepancies in state-owned enterprises

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 21/1998/TT-BTC ON FEBRUARY 20, 1998 GUIDING THE WORK OF PREPARATION AND INSPECTION OF THE 1997 FINANCIAL REPORTS OF STATE ENTERPRISES

The Ministry of Finance issued Decision No. 1141/TC/QD/CĐKT on November 1, 1995, and Circular No. 73 TC/TCDN on November 12, 1996, guiding the establishment, public disclosure, and auditing of financial statements and accounting of state-owned enterprises. State-owned enterprises, independent member enterprises, and centralized accounting units of state-owned corporations must organize the preparation, public disclosure, and auditing of financial statements according to the above regulations. To implement these regulations effectively and in accordance with the current situation of state-owned enterprises, the Ministry of Finance supplements some points regarding the preparation and auditing of state-owned enterprises' financial statements for the year 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 respective 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 the year 1997 onwards, the Ministry of Finance will not consider increasing or decreasing depreciation beyond the levels registered by the enterprise.

1.2. Regarding wages: Implement according to the provisions of Government Decree No. 28/CP dated March 28, 1997, and Circular No. 13/LĐTBXH-TT dated April 10, 1997, of the Ministry of Labor, Invalids, and Social Affairs. In cases where enterprises have not been approved for wage rates by December 31, 1997, the wage fund of the enterprise shall be determined according to the provisions in Section c, Point 2, Part C, Item 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 reserve funds for inventory write-downs, doubtful debts, and securities write-downs shall be carried out according to the provisions of Circular No. 64 TC/TCDN dated September 15, 1997, of the Ministry of Finance. The objects, conditions, and methods of establishing reserve funds must comply strictly with the regulations. For auxiliary materials with large quantities and high values, as well as goods and materials that have deteriorated in quality but have not yet been processed, they also fall within the scope of establishing reserves.

State-owned enterprises engaged in public services are not subject to the establishment of reserves under Circular No. 64 TC/TCDN mentioned above, but if such enterprises have business operations, then raw materials, fuel, materials, and inventory of goods, as well as difficult-to-collect receivables of these business units, also fall within the scope of establishing reserves, provided that the relevant systems and regulations are in place.

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 Government Decree No. 59/CP dated October 3, 1996, and Circular No. 70 TC/TCDN dated November 5, 1996, of the Ministry of Finance. The wage rate stipulated in Point 1.2 above serves as the basis for determining the maximum limit of the two reward and welfare funds.

2. Auditing of financial statements: 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 statements of enterprises must be accompanied by an internal audit report. Circular No. 73 TC/TCDN also stipulates that financial statements must be confirmed by an internal auditor or an independent auditor. However, since the new internal audit regulation has just been issued, enterprises have not yet established internal audit organizations. Therefore, the preparation, public disclosure, and submission of financial statements for the year 1997 by enterprises do not necessarily need to go through internal audits or independent audits and confirmation from these audit organizations. The General Director and Chief Accountant are fully responsible for the accuracy and truthfulness of the financial statements. Starting from 1998, enterprises must organize and implement internal audits or independent 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 corporations must complete and submit financial statements to relevant state agencies before February 15, 1998, according to the addresses specified in Decision No. 1141 TC/QD/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 corporations established by provincial and municipal People's Committees pursuant to the delegation of the Government, and centralized accounting corporations, they must also submit annual financial statements to the State Capital and Asset Management Agency at the corporation's main office location 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. When dependent enterprises submit financial statements to their superiors, they must simultaneously send them to the State Capital and Asset Management Agency and the Tax Bureau at the enterprise's main office location.

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 must direct and evaluate the financial statements of each state-owned enterprise, and consolidate them by locality, industry, and nationwide. Consolidated financial statements of state-owned enterprises by locality must be sent to the Chairmen of Provincial and Municipal People's Committees directly under the central government; consolidated financial statements of enterprises under ministries and industries must be sent to the heads of ministries and industries before May 30, 1998. The consolidated financial statement of state-owned enterprises nationwide must be completed before June 30, 1998, for the Ministry of Finance to report to the Government.

II. THE INSPECTION OF ENTERPRISE FINANCIAL STATEMENTS

The verification of state-owned enterprises' financial reports is a regular task of the agency managing state capital and assets at enterprises. Depending on the capacity and financial operation situation of the enterprises, comprehensive or specialized inspections shall be organized. Firstly, focus should be placed on enterprises with poor business performance, signs of significant asset and capital loss, and those unable to pay their debts to clarify these issues. Each inspected enterprise must have a conclusion report. The inspection report shall 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 agency managing state capital and assets at enterprises shall report to the Ministry of Finance for resolution. Quarterly, the General Department of State Capital and Asset Management at Enterprises shall compile and report to the Ministry of Finance the results of verifying the financial reports of state-owned enterprises. To avoid inconvenience for enterprises, the agency managing state capital and assets at enterprises shall proactively coordinate with relevant agencies to ensure inspections are not overlapping or repetitive within a year for the same enterprise.

III. RESPONSIBILITY REGIME

1. For state-owned enterprises:

Failure to submit financial reports to state agencies as prescribed will result in administrative penalties according 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. Agencies managing state capital and assets at enterprises:

2. State capital and asset management agencies at enterprises:

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

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.

2.4. If there is no inspection, or if inspection does not detect, or detects but fails to promptly report the situation of losses, capital loss, 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 reports, the assigned officers and related organizations shall be disciplined according to the degree of violation.

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:

3.2. Issue administrative penalty decisions against enterprises according to Decree No. 22/CP and the guiding circular No. 45 TC/TCT after two reminders without submission of financial reports.

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

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.

This Circular takes effect from January 1, 1998.

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