Circular No. 64-TC/TCDN guides the system for setting aside reserves for price reduction of inventory, bad debt reserve, and securities price reduction reserve at 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 has issued Decision No. 1141/TC/QĐ/CĐKT on November 1, 1995 and Circular No. 73 TC/TCDN on November 12, 1996 guiding the work of preparation, public disclosure, and inspection of financial reports and accounting inspections of state enterprises. State enterprises, independent member enterprises, and centralized accounting parts of state corporations must organize the preparation of financial reports, publicly disclose their finances, and conduct accounting and financial report inspections according to the above regulations. To implement these regulations effectively and in accordance with the current situation of state enterprises, the Ministry of Finance supplements some points in the work of preparing and inspecting the 1997 financial reports of state enterprises 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 the levels registered with the state capital and asset management agencies at the enterprises. Enterprises that have reported and been approved by the Ministry of Finance for depreciation outside the time frame specified in Decision No. 1062/TC/QĐ/CĐKT dated November 14, 1996 shall apply the approved level. From the 1997 settlement onwards, the Ministry of Finance will not consider increases or decreases in depreciation outside the levels registered by the enterprise.

1.2. Regarding wages: Implement as prescribed in Decree No. 28/CP dated March 28, 1997 of the Government 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 wage unit prices by December 31, 1997, the actual wage fund of the enterprise shall be determined according to paragraph c point 2 section C part 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 provisions for inventory write-downs, doubtful debts, and securities write-downs shall be carried out as prescribed in Circular No. 64 TC/TCDN dated September 15, 1997 of the Ministry of Finance. The objects, conditions, and methods of establishing provisions must comply strictly with the regulations. For large quantities of auxiliary materials with high value and goods that have deteriorated quality but have not yet been processed, they also fall within the scope of establishing provisions.

State enterprises operating public services are not subject to the establishment of provisions under Circular No. 64 TC/TCDN mentioned above, but if there are business units, then raw materials, fuel, materials, and goods in stock, and difficult-to-collect receivables of these units also fall within the scope of establishing provisions, provided that the relevant systems have been established.

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 Article 32 of the Financial Management and Business Accounting Regulations for State Enterprises issued together with Decree No. 59/CP dated October 3, 1996 of the Government and Circular No. 70 TC/TCDN dated November 5, 1996 of the Ministry of Finance. Actual wages serve as the basis for determining the maximum limit of the two reward and welfare funds as stipulated in Point 1.2 above.

2. Issues related to auditing financial reports: 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 reports of enterprises must be accompanied by internal audit reports. Circular No. 73 TC/TCDN also stipulates that financial reports must be confirmed by internal auditors or independent auditors. However, the newly issued internal audit regulation, enterprises have not yet established internal audit organizations. Therefore, the preparation, public disclosure, and submission of 1997 financial reports of enterprises do not necessarily need to go through internal audits or independent audits and confirmations from such organizations. The General Director and Chief Accountant are fully responsible for the accuracy and truthfulness of the financial reports. 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 enterprises, independent member enterprises, and centralized accounting parts of state corporations must complete and submit financial reports to state agencies before February 15, 1998, according to the addresses specified in the aforementioned Decision No. 1141 TC/QĐ/CĐKT.

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 corporations established by provincial and municipal People's Committees pursuant to the delegation of the Government, and centralized accounting state corporations, they must also submit their annual financial reports 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 reports to their superiors, they must simultaneously send them to the State Capital and Asset Management Agency and the Tax Bureau at the location of the enterprise's main office.

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

II. THE INSPECTION OF ENTERPRISE FINANCIAL STATEMENTS

Checking the financial reports of state-owned enterprises 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. First priority should be given to 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 checking 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 required 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 Chairman 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 timely report the situation of losses, capital loss, and 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 staff assigned to monitor enterprises and related organizations will 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 notices urging submission of financial reports remain unheeded.

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.