Circular No. 444-TC/GTTN stipulates procedures for compensating losses and measures to address increases or decreases in capital due to profits and losses arising from changes in prices and discrepancies in discounts for state-owned domestic trade enterprises.

CIRCULAR

Regulations on procedures for compensating losses and measures to address discrepancies in capital increases or decreases arising from profit and loss occurrences due to price adjustments and over/under discount situations in state-owned trading enterprises in the domestic trade sector

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THE MINISTER OF FINANCE

Based on economic and financial management regulations;

Based on Decree No. 235-CP dated December 4, 1969 of the Council of Ministers promulgating the Interim Financial Revenue Regulation and Profit Distribution Regulation for State-Owned Enterprises in the Domestic Trade Sector, and Circular Jointly Issued by the Ministry of Finance, Bank, and Domestic Trade No. 93TT/LB dated April 16, 1970 guiding the implementation of the aforementioned regulation;

Based on the provisions of Circulars Jointly Issued by the Bank, Ministry of Finance, and Domestic Trade Nos. 21-TT/LB dated December 12, 1962 and No. 27-TT/LB dated April 27, 1962 addressing certain issues related to the loan operations of the State Bank and the tax payment obligations of state-owned trading enterprises to ensure working capital for state trading units;

Based on the results of the Deputy Minister-level meeting of the Ministries of Finance, Bank, and Domestic Trade held on September 17, 1970.

The Ministry of Finance hereby issues this circular to regulate procedures for compensating losses and measures to address discrepancies in capital increases or decreases and profit and loss occurrences due to price adjustments and over/under discount situations, applicable to state-owned enterprises in the domestic trade sector.

I. COMPENSATION FOR LOSSES

1. Planned Losses.

According to the financial revenue system and profit distribution system for state-owned enterprises in the domestic trade sector, each commodity group in the domestic trade sector is allocated a fixed discount rate or premium sufficient to cover business costs for the entire sector. Therefore, from now on, the domestic trade sector will no longer have planned losses in commercial operations but only losses due to compliance with state pricing policies or losses from other non-circulation activities. These losses must be planned: specifically calculated, reviewed and approved by the supervisory authority and the finance authority, and included in the annual compensation plan (divided by quarter and month). The Ministry of Domestic Trade will consolidate the compensation plans for first-tier enterprises and send them to the Ministry of Finance; provincial and municipal trade departments will consolidate the compensation plans for second-tier enterprises and send them to provincial and municipal finance departments. Based on these plans, the budget will allocate funds monthly: for first-tier enterprises, the central budget will transfer funds through the Ministry of Domestic Trade for distribution at the beginning of each month, specifying the amount for each first-tier enterprise; for second-tier enterprises, the local budget will transfer funds through provincial and municipal trade departments for distribution at the beginning of each month. At the end of the year and quarter, enterprises receiving loss compensation according to the plan must settle actual losses to allow timely budget adjustments for the next quarter; if quarterly settlements are not completed in time, the budget will temporarily suspend the next period's loss compensation.

2. Unplanned Losses, Exceeding Plan.

a) Due to Objective Reasons:

When there are unplanned or excess losses, the enterprise must prepare a settlement report detailing the objective reasons. These reports must be reviewed by the supervisory authority (the Ministry of Domestic Trade for first-tier enterprises; provincial and municipal trade departments for second-tier enterprises) and submitted to the finance authority (at the same level) requesting loss compensation. Upon receipt, the finance authority must inspect and approve the compensation within one month if it is determined that the loss is due to objective reasons, with the central budget compensating first-tier enterprises and the local budget compensating second-tier enterprises.

b) Due to Subjective Reasons:

Losses due to subjective reasons must be handled according to Decree No. 49-CP dated April 9, 1969 of the Council of Ministers regarding material responsibility systems, Directive No. 102-TTg dated June 5, 1970 of the Prime Minister on the resolution of accumulated materials and goods, and Circular No. 199-TT/LB dated May 4, 1967 on the handling of asset losses in the domestic trade sector. After assigning responsibility and compensating according to the prescribed state regulations in the aforementioned documents, the remaining loss (or loss) must be deducted from the enterprise's profits.

P: protein content in the sample based on dry matter, %Excess losses must be calculated separately for each commodity or product.

II. DISCREPANCIES IN CAPITAL INCREASES OR DECREASES DUE TO PRICE ADJUSTMENTS AND LOSS OR PROFIT WHEN PRICES ARE INCREASED OR DECREASED

1. Starting from January 1, 1970, implementing the new financial revenue system, domestic trade enterprises purchase industrial products from production enterprises, foreign trade enterprises, or materials at retail guidance prices (current retail prices) or retail supply prices minus (-) discounts. Therefore, when the state decides to increase or decrease retail prices, although the discount rate (the discount rate allocated by the Ministry of Domestic Trade for each commodity group and used as the basis for calculating payment between domestic trade enterprises and sellers) remains unchanged, the absolute amount and percentage of fees and profits in the discount will change as follows:

- Circulation Fees:

The absolute amount remains unchanged

The percentage relative to sales changes.

- Sales Profits:

Both the absolute amount and the percentage change.

Domestic trade enterprises must recalculate the absolute amount and percentage of profits and fees to pay profits into the budget.

2. When the state decides to increase or decrease prices, it simultaneously adjusts the purchase prices for domestic trade enterprises and also adjusts the book value of inventory; thus, the inventory value also increases or decreases accordingly. The solution for these discrepancies in inventory value increases or decreases is as follows:

a) In case of price increase: When the decision to increase prices leads to an increase in inventory value, the domestic trade enterprise can record an increase in working capital by 100% of the discrepancy, treating it as additional capital provided by the budget to ensure adequate reserves of increased-price items.

b) In case of price decrease:

When there is a decision to reduce prices, thereby reducing the value of inventory, the inventory value must be recalculated: for the portion of working capital (30%) provided by the state budget, the trading enterprise shall account for the reduction in working capital; for the portion of working capital borrowed from the State Bank (70%), the state budget shall provide funds to the enterprise to repay the State Bank: the central budget shall provide funds for Class I enterprises through the Ministry of Internal Trade; local budgets shall provide funds for Class II enterprises through the Departments and Bureaus of Commerce.

For goods centrally managed, distributed, and price-reduced by the central government, the central budget shall compensate 70% of the difference in reduced inventory value for the entire internal trade sector (Class I + Class II) through the Ministry of Internal Trade.

c) Specific actions required:

When there is a policy to lower prices, the agency authorized by the state to decide on price reductions must consult with the financial authority at the same level so that the financial authority can allocate the budget.

Upon receiving a decision to increase or decrease prices, trading enterprises must inventory their stock, recalculate its value, determine the difference between the old and new inventory values based on the old and new prices, and report this to their superior management agencies. After approval by the superior management agency, the enterprise may then account for increases or decreases in self-owned working capital.

The Ministry of Internal Trade will review, examine, and compile the amounts needed for compensation due to reduced inventory value from price reductions for Class I enterprises and submit them to the Ministry of Finance for compensation; the Departments and Bureaus of Commerce will review, examine, and compile the amounts needed for compensation due to reduced inventory value from price reductions for Class II enterprises and submit them to the Departments and Bureaus of Finance for compensation.

For goods centrally managed, distributed, and price-reduced by the central government, the Ministry of Internal Trade will review, examine, and compile the amounts needed for compensation due to reduced inventory value from price reductions for both Class I and Class II enterprises and submit them to the Ministry of Finance for compensation.

Upon receipt of these reports, if the financial authorities find them correct, they will provide compensation according to point b above.

The Ministry of Internal Trade and the Departments and Bureaus of Commerce must settle accounts with the financial authorities at the same level for the amounts received as compensation (quarterly settlements).

d) Specifically for surplus goods of poor quality or deteriorated goods which need to be discounted or repaired before being sold, or goods that have completely lost their quality and must be scrapped:

For surplus goods of poor quality or deteriorated goods, first, the Ministry of Internal Trade must direct the entire industry to actively and urgently dispose of such goods, minimizing potential losses as much as possible.

For goods requiring disposal, there must be a determination of quality by the relevant quality management agency, and a Disposal Committee must be established. This committee will base its decisions on the provisions of the Government's directives No. 105-TTg dated October 22, 1963, and No. 102-TTg dated June 5, 1970, and the Council of Ministers' decree No. 49-CP dated April 9, 1970, and the joint circulars No. 27-TT/LB dated December 10, 1964, and No. 199-TT/LB dated May 4, 1967, to determine appropriate measures, including discounting or repairing for sale, or scrapping goods that have completely lost their quality.

The difference in discounts, the loss of assets, and the cost of repairs for goods that have completely lost their quality will be handled as follows:

- If it is due to external factors, the state budget will compensate; the central budget will compensate Class I enterprises, and the local budget will compensate Class II enterprises.

- If it is due to personal or enterprise negligence or the negligence of the supervising industry, responsibility must first be clearly defined, and dealt with under the material liability system and other current systems. After proper handling and compensation, the remaining losses must be accounted for in the enterprise's business results.

III. SETTLEMENT OF THE DIFFERENCE IN COMMISSIONS FOR 1970

The commission rate for the entire internal trade sector in 1970 was determined by the state at 9.5%, calculated on sales revenue (excluding price increase or decrease factors). The Ministry of Internal Trade allocated this commission rate to each group of goods, individual items, and each level (Class I, Class II), but not accurately enough, resulting in some enterprises having excess commissions while others have insufficient commissions. In Circular No. 214-TC/TQD dated July 25, 1970, the Ministry of Finance provided guidance on determining the excess and shortage of commissions; this circular specifies how to handle the excess and shortage of commissions.

1. For Class I enterprises: The Ministry of Internal Trade will reallocate commissions from enterprises with excess commissions to those with insufficient commissions. Finally, if there is still a shortfall, the central budget will temporarily provide funds to the Ministry of Internal Trade, which will then provide temporary funding to enterprises with insufficient commissions.

2. For Class II enterprises: The commission rate allocated by the Ministry of Internal Trade to provinces and cities generally exceeds the needs. Each month, Class II companies with excess commissions will deposit the excess into a special account called the "Commission Adjustment Account" opened by the Departments and Bureaus of Commerce at the branch of the State Bank. The Departments and Bureaus of Commerce will use these excess commissions to compensate enterprises with insufficient commissions. Under no circumstances should these excess commissions be used for other compensations or any other purposes.

3. The Ministry of Internal Trade is responsible for compiling the total excess and shortage of commissions from all regions and the Trading Department to review and ensure that the total commercial commission for the entire internal trade sector in 1970 does not exceed the 9.5% rate calculated on sales revenue as stipulated by the state.

4. At year-end, the Ministry of Finance will discuss with the Ministry of Internal Trade and the State Bank of Vietnam to guide localities on how to use the excess commissions in their respective areas.

5. If any locality still has a shortage of commissions after internal adjustment, the Departments and Bureaus of Commerce along with the Departments and Bureaus of Finance must report (confirmed by the Provincial or Municipal People's Administrative Committee) to the Ministry of Internal Trade and the Ministry of Finance for resolution.

Hereby, the Ministry reminds the Departments and Bureaus of Finance to strictly implement Directive No. 214-TC/TQD dated July 25, 1970, and report to the Ministry the results of determining the correct fee rates and commission standards for 1970 for the Departments and Bureaus of Commerce.