Circular No. 63/1999/TT-BTC guides the management of revenue, expenses, and product cost at state-owned enterprises.

CIRCULAR

Guidelines for managing revenue, expenses

and production costs of products and services at state-owned enterprises

Implementing Decree No. 59/CP dated October 3, 1996 of the Government on the Financial Management and Accounting System for State-Owned Enterprises and Decree No. 27/1999/NĐ-CP dated April 20, 1999 of the Government amending and supplementing certain provisions of the aforementioned financial regulations;

The Ministry of Finance issues guidelines for the management of revenue, expenses, and production costs of products and services at state-owned enterprises as follows:

I. GENERAL PROVISIONS

1. State-owned enterprises must organize strict management of all revenue, expenses, and production costs of products and services to enhance business efficiency.

2. Enterprises must accurately and fully calculate business expenses, cover all expenses through revenues, and bear responsibility for the results of their business activities.

3. Based on economic and technical norms and financial systems issued by competent authorities, enterprises must:

- Develop and continuously improve their economic and technical norm system in accordance with their specific circumstances.

- Strictly comply with current state financial expenditure regulations and accounting and statistical systems.

4. The Board of Directors, General Director, and Director of the enterprise are responsible before the State and the law for the accuracy and legality of all revenue, expenses, and business results of their enterprise.

5. In this Circular, the following terms are understood as follows:

- Payment discount is the amount deducted from the seller's price for the buyer who pays for purchased products, goods, or services before the payment deadline and is recorded on the sales invoice or economic contract.

- Sales discount is the amount deducted from the agreed selling price due to poor quality, incorrect specifications, or large quantities of products, goods, or services sold to customers.

- Revenue from returned sales is the value calculated based on the payment price of products, goods, or services that were sold but returned by customers due to breaches of conditions stipulated in economic contracts such as poor quality, incorrect specifications, types...

- Commission for agents is the amount paid by the enterprise to agents for the sale of its products, goods, or services.

- Brokerage commission is the amount paid to economic organizations, collectives, or individuals acting as brokers in the purchase and sale of materials, products, or service provision for the enterprise's business operations.

II. SPECIFIC MANAGEMENT REGULATIONS

A. REVENUE MANAGEMENT:

1. Revenue of state-owned enterprises includes revenue from business activities and income from other activities.

1.1. Revenue from business activities is the total money received from selling products, goods, providing services after deducting (-) sales discounts and returned sales (if there are valid documents) accepted by customers for payment (regardless of whether the money has been collected or not).

Business revenue of enterprises also includes:

- Additional fees outside the selling price (if any), subsidies, surcharges according to state regulations that the enterprise enjoys for products, services consumed during the period.

- The value of products, goods given away, exchanged, or used internally within the enterprise such as electricity produced for use in power plants, finished cement used for repairs in cement factories, fans produced for use in fan manufacturing plants.

Enterprises can only record reduced revenue when sales discounts occur after issuing sales invoices. For large volume sales, if discounts are given to buyers, they must be clearly stated on the final invoice issued.

Enterprises must have management regulations and publicly announce sales discount amounts. The enterprise director has the authority to decide and is responsible for these deductions.

Returned sales must have a written request from the buyer specifying the quantity, unit price, and value of the returned goods along with re-entry warehouse documents for the said goods.

1.2. Income from other activities includes income from financial investment activities and irregular activities.

1.2.1. Income from financial investment activities includes the following income sources:

- From joint ventures, joint stock investments; interest from deposits, interest from loans (excluding interest on borrowed funds for investment construction); late payment interest from installment sales; government interest subsidy in business operations (if applicable); income from securities trading (treasury bills, bonds, bills, stocks)...

- From foreign currency transactions or income from exchange rate differences in foreign currency operations according to financial regulations.

- Reimbursement of remaining balances in inventory write-down reserves.

- Rent income from leasing assets that are not regular business operations.

1.2.2. Income from irregular activities includes income from non-recurring activities outside those specified in point 1.2.1 of section A such as income from selling surplus materials, goods, assets; selling tools and equipment that have been fully depreciated, damaged, or unused; receivables that cannot be recovered due to creditor reasons; income from transferring, liquidating assets, bad debts written off but now recovered; reimbursement of inventory write-down reserves, bad debt provisions previously included in the previous year's expenses; reimbursement of pre-funded warranty costs for goods, products, projects, and project components when the warranty period expires; pre-funded major repair costs for fixed assets exceeding actual expenditures; income from using or transferring intellectual property rights; income from late payment penalties under economic contracts; income from payment discounts; tax payments (excluding corporate income tax) reduced by the State.

2. Some points to note regarding the management and accounting of revenue:

- For products, goods, services of business, financial, and extraordinary activities subject to value-added tax (VAT) if:

+ The amount of VAT payable is determined according to the deduction method, then revenue or income is the amount receivable from activities excluding VAT (output).

+ The amount of VAT payable is determined according to the direct payment method, then revenue or income is the total amount receivable from activities (total settlement price).

- For products, goods, provision of services of business, financial, and extraordinary activities not subject to VAT, revenue or income is the amount receivable from such activities.

2.1 Specific methods for determining certain items of revenue:

- For goods sold on installment basis, revenue from business operations is calculated based on the lump sum selling price, excluding late payment interest. Late payment interest is included in annual financial activity income.

- For products, goods, services used to exchange other goods or services, revenue is calculated based on the selling price of similar products, goods, or services at the time of exchange.

- For products, goods, services produced by enterprises for gift-giving or internal consumption in production, revenue is calculated based on the production cost (or cost price) of those products, goods, or services.

- For asset leasing activities where advance rental payments are received for multiple years, annual revenue is the total rental amount divided by the number of leasing years.

- For agency sales activities, revenue is the amount receivable for agency commission.

- For processing activities, revenue is calculated based on the processing price recorded on the invoice for completed processed products during the period.

- For contracted products in agricultural and forestry production enterprises, if payment is made in cash, revenue is the amount receivable recorded in the contract upon maturity; if payment is made in kind, revenue is recognized and calculated based on the actual selling price when the contracted products are sold.

- For credit activities, revenue is the interest income from loans due for collection within the period.

- For insurance activities, revenue is the insurance premium receivable within the period.

- For construction projects carried out over multiple years, annual revenue is the value receivable corresponding to the value of completed construction work, project components, or constructions accepted for payment by the contracting party in that year.

In cases where construction enterprises subcontract to sub-contractors, revenue includes the value of subcontracted construction work.

2.2 The timing for recognizing revenue is when the enterprise has transferred ownership of goods or products, completed service provision to the buyer, or completed work according to the contract and been accepted for payment by the buyer, regardless of whether payment has been received or not.

Goods or products sold through agents at the stipulated price by the principal and entitled to agency commission, the timing for recognizing revenue is when the goods sent to the agent have been sold.

3. Enterprises generating revenue in foreign currency must convert it into Vietnamese Dong at the average inter-bank foreign exchange transaction rate published by the State Bank of Vietnam at the time of revenue generation.

4. All revenue generated during the period must be supported by valid invoices and reflected fully in the enterprise's accounting books according to current accounting regulations.

B. MANAGEMENT OF EXPENSES AND COSTS

Enterprise expenses include business operation expenses and other expenses.

1. Management of business operation expenses:

Business operation expenses include costs related to the enterprise's business activities such as: raw materials, fuel, material costs; depreciation of fixed assets; salaries and wage-like expenses; contributions to social insurance, health insurance, and trade union fees as prescribed by the State; external service fees; other monetary expenses.

The management and accounting of expenses are regulated as follows:

1.1 Raw materials, materials, fuels, power... (hereinafter referred to as material costs) must be strictly managed in two aspects: material consumption rates and material prices.

a) Material consumption rates:

- The General Director or Director must base on material consumption standards issued by authorized bodies and the specific situation of the enterprise to establish the enterprise's material consumption standards system to be submitted to the Board of Directors (for enterprises with a Board of Directors), approved, and responsible for the accuracy of these standards.

Materials used in business operations must be strictly managed according to the enterprise's established consumption standards in the stages of storage, distribution, and settlement.

- The enterprise must monitor, inspect, organize regular and periodic analysis of the implementation of material consumption standards to propose measures to continuously improve the standard system, promptly commend and reward collectives and individuals who use materials economically, and handle cases of excessive material consumption.

b) Material prices: Used for accounting and determining material costs are actual prices, including:

- External material purchase prices include: Purchase price recorded on the seller's invoice (if self-imported materials are in foreign currency, they are converted into Vietnamese Dong at the actual exchange rate or the average inter-bank foreign exchange transaction rate published by the State Bank of Vietnam at the time of occurrence plus import taxes and additional charges - if applicable) plus transportation fees, handling fees, storage fees, insurance fees, reasonable losses during transit, warehouse rent fees, pre-storage processing fees (if applicable), and selection and recycling fees.

- Self-manufactured material prices include: Actual material prices from inventory plus actual costs incurred during the manufacturing process.

- Outsourced processing material prices include: Actual material prices from inventory for outsourcing plus processing fees such as transportation fees, handling fees, insurance fees, and fees paid to the processor.

- The prices of various types of materials and processing, transportation, storage, procurement costs... mentioned above must be recorded on invoices and documents in accordance with the regulations of the Ministry of Finance. In cases where materials are agricultural, forestry, aquatic products... purchased from direct producers without invoices, the buyer must prepare a purchase list detailing the name, address of the seller, quantity of goods, unit price, total amount, signature of the seller, and approval by the company's director.

c) For tools and equipment used in business operations such as molds, scaffolding, scales, racks, tables and chairs, handheld computers... enterprises shall allocate them gradually to cost items during business periods based on their usage time and value according to appropriate criteria.

d) The actual consumption value of materials is accounted for as material costs after deducting compensation money from individuals or groups causing excess material consumption beyond the standard and the value of recovered scrap (if any), and the reduced purchase price of goods (if any).

1.2. Depreciation expenses of fixed assets:

All fixed assets of enterprises must be utilized in business activities and depreciated according to state regulations to recover capital. After full depreciation, if the fixed asset can still be used, the enterprise does not need to continue depreciation but must manage and use it according to current regulations.

Completed construction projects that have been put into use but not yet settled for their value, enterprises temporarily increase the value of fixed assets according to provisional pricing for depreciation purposes. After acceptance and settlement of the project value, the value of fixed assets must be adjusted according to the settled value.

1.3. Labor costs and allowances with wage characteristics:

Enterprise labor costs include wages, salaries, and allowances with wage characteristics payable to employees participating in the enterprise's business activities according to current regulations.

Wages must be strictly managed and spent for their intended purpose, linked to production and business results based on labor norms and reasonable wage rates approved by competent authorities.

Mid-shift meal expenses for employees participating in the enterprise's business activities must be paid according to current regulations. If the expense exceeds the state-set limit, the excess is covered from the welfare fund. If the welfare fund is insufficient, the person responsible for the expenditure must compensate.

1.4. Social insurance, health insurance, and trade union fees are calculated based on the enterprise's wage fund according to current state regulations.

Expenses for Party organization activities are taken from the organization's budget. If the Party organization's budget is insufficient, the shortfall is accounted for as business expenses of the enterprise.

1.5. External service costs:

These are costs for external repairs of leased fixed assets, electricity, water, telephone charges, handling and transportation fees for goods and products, agency commissions, brokerage fees, export and import commissions, insurance premiums, auditing and consulting fees, advertising fees, and other external service costs.

+ The value of the volume of construction work paid to subcontractors is the main contractor's cost.

+ Agency and commission fees must be reflected in agency and commission contracts and only accounted for based on the amount due, supported by valid documentation.

+ Brokerage commissions: enterprises must establish commission limits and management rules tied to economic benefits generated by brokerage activities. Brokerage commissions cannot be applied to agents of the enterprise, designated customers, managerial positions within the enterprise, or employees responsible for supplying materials and selling products.

+ Costs for repairing fixed assets to restore their capacity are accounted for as business expenses in the year based on actual expenditures. If repair costs are exceptionally high, they may be allocated over subsequent years. For special fixed assets requiring periodic major repairs, enterprises must pre-provision for these costs with written approval from the financial management authority. If the pre-provision is less than actual costs, the difference is added to expenses; if more, it is recognized as extraordinary income.

1.6. Other cash expenses:

These are expenses outside those listed above, such as business license tax, land use tax or rent, natural resource tax, bridge tolls, hospitality and ceremonial expenses, advertising, marketing, foreign transaction costs, conference expenses, recruitment costs, military training, knowledge enhancement for staff, labor protection expenses, allowable loss expenses, product warranty expenses, reserve funds, payments to总公司管理基金，会费，封缄费，投标费用，以及根据《劳动法》规定支付给员工的终止劳动合同补偿金等其他费用。

- Hospitality, reception, meeting, diplomatic transaction, and other cash expenses must be closely related to business and economic efficiency. Specific spending levels are decided by the enterprise's general manager, not exceeding the limits set out in Clause 11, Part III of Circular No. 99/1998/TT-BTC dated July 14, 1998, issued by the Ministry of Finance to guide the implementation of Decree No. 30/1998/NĐ-CP dated May 13, 1998, of the Government detailing the implementation of the Law on Corporate Income Tax.

For certain specialized industries such as exhibitions and advertising, which require higher advertising, marketing, diplomatic, and transaction expenses than the above limits, enterprises must establish appropriate limits based on their operational characteristics, report to the establishment decision-making body and the Ministry of Finance for written approval.

- Labor protection expenses are accounted for as costs based on actual expenditures within the current normative limits.

- An enterprise is allowed to allocate in advance warranty expenses into costs for products, goods, construction works requiring warranties over multiple years. Upon expiration of the warranty period, if actual warranty expenses exceed the allocated amount, the difference shall be additionally recorded as cost. In case actual warranty expenses are less than the allocated amount, the difference shall be recorded as other income.

- The management fund of the Corporation is intended for expenditure on the Corporation's management structure, training activities, medical treatment, scientific research that the Corporation undertakes collectively for its member units.

According to the plan approved by the Board of Directors, the General Director decides the level of mobilization from each member unit. Member enterprises record the amount due for payment as cost.

During the year, if the management fund of the Corporation has been mobilized but not fully utilized, it can be carried forward to the next year for expenditure and reduce the mobilization level for the following year. If the mobilized amount is less than the actual expenditure, the shortfall will be supplemented in the following year.

- Enterprises are permitted to allocate pre-provisioning expenses for difficult-to-collect receivables and inventory valuation adjustments into current period costs according to existing regulations.

- Termination benefits for employees are implemented in accordance with Decree No. 198/CP dated December 31, 1995 of the Government detailing and guiding the implementation of certain provisions of the Labor Code regarding labor contracts and other current state documents.

- Enterprises may allocate productivity bonuses, innovation awards, cost-saving bonuses, and record them as business expenses based on actual expenditures without exceeding the benefits derived from these expenditures. The Board of Directors or the General Director (for enterprises without a Board of Directors) must promulgate and publicly announce bonus regulations.

- Enterprises are allowed to record research and development expenses, technological innovation expenses, new product testing expenses, and innovation expenses aimed at enhancing business efficiency based on actual expenditures. Research topics and project budgets must be approved by the Board of Directors or the General Director (for enterprises without a Board of Directors), who bear responsibility for the effectiveness of these projects.

- Expenses for training classes, skill enhancement, management capacity improvement, and healthcare facilities are only allocable to costs for employees of the enterprise. Enterprises record such expenses based on actual expenditures after deducting any government budget support (if applicable). The maximum expense level cannot exceed 1.3 times the state-defined standard for public service expenses for these personnel.

If training and treatment are provided for non-enterprise personnel, the enterprise must charge fees to cover these expenses.

- Educational support expenses for educational organizations established according to state regulations, such as scholarship funds, schools for disabled students, and homeless students, are determined based on prescribed systems and the financial capabilities of the enterprise. The General Director decides the level of such support.

- Actual environmental protection expenses incurred during the period, if significant and having long-term effects, should be gradually allocated over subsequent years.

- Expenses for female workers according to prescribed regulations.

- Other expenses in monetary form.

1.7. The following items shall not be included in business operating costs:

- Penalties for violations of laws such as traffic laws, tax laws, environmental laws, labor laws, reporting and statistical systems, financial accounting systems, and other laws. If penalties result from collective or individual violations, the collective or individual must pay the penalty. Any remaining penalty beyond compensation shall be deducted from post-tax profits.

- Investment expenses for basic construction, procurement of tangible and intangible fixed assets, and contributions to social organizations.

- Travel expenses abroad exceeding the enterprise's standard.

- Expenses covered by other sources of funding such as public service expenses already funded by the state budget, higher authorities, or other organizations; interest payments on borrowed investment capital during the construction period before completion and commissioning. Such interest is recorded as part of the construction investment cost.

- Production and business expenses exceeding prescribed levels under the financial system shall be offset by incentive and welfare funds.

2. Cost calculation for products and services.

Depending on production technology and business conditions, enterprises determine the subject and select appropriate methods to calculate the cost of products and services. Product and service costs can be calculated by factors or categories.

2.1. Production costs for products and services include direct cost categories:

- Direct material costs: including costs for raw materials, materials, fuel, and power consumed directly for producing products and services.

- Direct labor costs: including payments to direct production workers such as wages, salaries, allowances with wage characteristics, meal allowances, social insurance, health insurance, and trade union fees for direct workers.

- Common production costs: including common costs incurred in workshops and business departments such as wages, allowances, meal allowances for workshop staff, material costs, tools, equipment usage costs for workshops, depreciation of fixed assets, external service costs, and other monetary costs not mentioned above.

2.2. Total costs for sold products and services include:

- Production costs of sold products and services.

- Sales expenses: including costs incurred during the sale of products, goods, and services such as wages, allowances payable to sales staff, commissions, marketing, packaging, transportation, storage... depreciation of fixed assets; material costs, packaging, tools, utilities, external service costs, and other monetary costs like warranty expenses, advertising expenses...

- Business management costs: including business management expenses, administrative management expenses, and other common expenses related to the entire enterprise's activities such as: salaries and allowances, meal fees paid to the board of directors and management staff in various departments, insurance, trade union funds of the enterprise's management body; office material costs, office supplies, depreciation of shared fixed assets for the enterprise, service fees purchased from outside belonging to the enterprise's office, and other general expenses for the entire enterprise such as: bad debt provisions, inventory write-down provisions, audit fees, reception and ceremonial expenses, travel expenses, severance pay for employees; research and development costs, technological innovation costs, initiative costs, training costs to improve workers' skills and management capabilities; medical expenses for employees; environmental protection costs; costs for female employees, contributions to the management fund of the State Corporation.

In principle, all sales expenses and business management costs are transferred to products and services consumed in the year to determine the business results. In special cases, for enterprises with long production cycles that do not have products sold or whose revenue does not correspond to sales expenses and business management costs during the year, the sales expenses and business management costs incurred during the year shall be allocated to unfinished products and inventory based on the cost of unfinished production and the production cost of remaining products.

3. Management of other activity costs

Other activity costs include: financial activity costs and extraordinary costs.

3.1. Financial activity costs:

Financial activity costs are financial investment costs outside the enterprise aimed at using capital resources reasonably, increasing income, and enhancing business efficiency. Financial activity costs include:

- Joint venture and joint operation costs are costs arising from joint venture and joint operation activities (excluding costs of the joint venture or joint operation enterprise).

- Asset rental costs.

- Bond, bill, and stock purchase costs, including investment losses if any.

- Provision for securities price reduction.

- Foreign currency sale value, foreign exchange rate differences under the current financial system (excluding foreign exchange rate differences of foreign currency loans for construction investment when the project has not been put into use or foreign currency loans for joint venture capital contribution).

- Interest expense on borrowed funds raised during the period. For funds raised from entities outside state commercial banks, the interest rate must not exceed the ceiling interest rate of state commercial banks at the same time point.

- Discounting fees for early payment by buyers of goods and services.

- Other costs related to external financial investments.

Enterprises must base their decisions on the effectiveness of each financial activity and relevant laws, while detailing the actual costs incurred for each financial activity.

3.2. Extraordinary costs are:

Unusual costs include:

- Costs of selling off and liquidating fixed assets (including the residual value of fixed assets when liquidated and sold).

- Actual loss value of assets after deducting compensation from the person at fault and insurance organizations, scrap value recovered (if any), and amounts already covered by financial reserve funds.

- Costs for recovering written-off bad debts.

- Penalties due to breach of economic contracts.

- Costs for collecting penalties.

- Other extraordinary expenses.

Enterprises must establish regulations for managing each extraordinary cost. For damages caused by groups or individuals, the extent, cause, and compensation responsibility must be clarified along with administrative measures.

4. Some points to note regarding the management and accounting of costs.

4.1. - For products, goods, and services of business, financial, and extraordinary activities subject to Value Added Tax (VAT) if:

+ VAT payable is determined by the deduction method, costs do not include input VAT.

+ VAT payable is determined by the direct method, costs include input VAT (if any).

If an enterprise simultaneously engages in both taxable and non-taxable goods and services, it must separately account for input VAT, production and business costs according to the above regulations. If separate accounting is not possible, the entire input VAT must be accounted for collectively, and the deductible and non-deductible VAT must be allocated according to current regulations. Non-deductible input VAT must be included in production and business costs for the period according to the appropriate object, and may be gradually allocated to the costs of subsequent periods if significant.

- For products, goods, and services of business, financial, and extraordinary activities not subject to VAT, enterprise costs include input VAT.

4.2. Enterprises that incur costs in foreign currencies must convert them into Vietnamese Dong at the actual exchange rate or the average interbank foreign exchange rate published by the State Bank of Vietnam at the time the costs are incurred.

III. IMPLEMENTATION

1 ||| This Circular replaces Circular No. 76/TC/TCDN dated November 15, 1996 of the Ministry of Finance and takes effect from the date of the promulgation of Decree No. 27/1999/NĐ-CP dated April 20, 1999 of the Government.

2 ||| The financial management agencies are responsible for disseminating and guiding state-owned enterprises to implement the management of revenue, costs, and product costs as stipulated in this Circular.

3 ||| The Board of Directors, General Director, and Director (for enterprises without a Board of Directors) are responsible for organizing the implementation of this Circular.

4 ||| During the implementation process, if there are difficulties, state-owned enterprises must promptly report to the Ministry of Finance for study and resolution.