Joint Circular No. 74/LB guiding the adjustment of fixed asset prices in the small-scale and handicraft collective economic sector.

JOINT CIRCULAR

Guidelines for Adjusting the Original Price of Fixed Assets in the Small and Handicraft Collective Economic Sector

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Pursuant to Circular No. 126l-V3 dated November 7, 1987, of the Council of Ministers on adjusting the original price of fixed assets in the small and handicraft collective economic sector. The Ministry of Finance and the State Price Committee of the Central Cooperative Union of Small and Handicraft Industries hereby guide the adjustment of the original price of fixed assets of production cooperatives and cooperative groups in the small and handicraft industries (hereinafter referred to as cooperatives).

I- PRINCIPLES FOR RECALCULATING THE ORIGINAL PRICE OF FIXED ASSETS:

1/ The new original price of fixed assets shall be determined based on the principle of ensuring that the fixed assets are sold at the current wholesale price level, specifically:

a. Fixed assets purchased from the State (including those acquired or constructed before October 15, 1987) shall be recalculated according to the current State directive pricing system after October 15, 1987, issued pursuant to Decision No. 144/HĐBT dated September 22, 1987 of the Council of Ministers, Decisions No. 510-VGNN/BB, 511/VGNN/BB, 512/VGNN/BB dated September 30, 1987 of the State Price Committee, and pricing decisions of various Ministries, General Departments, People's Committees of provinces, cities, and centrally administered municipalities.

b. Fixed assets purchased from other sources, or imported, shall be recalculated based on their actual purchase prices. In cases where the actual purchase price is lower than the State directive price, the original price of the fixed asset shall be adjusted upward to correspond with the State's wholesale material supply price after October 15, 1987. If the fixed asset is not listed in the State's directive pricing catalog, the new original price may be calculated using a method equivalent to that of similar listed fixed assets, or based on the price that could have been purchased or constructed at the time of the price adjustment.

Imported fixed assets for which the State has not established a directive price shall be converted into Vietnamese currency according to the current settlement exchange rate.

c. Fixed assets self-manufactured or self-assembled by cooperatives shall be recalculated based on reasonable actual costs, but shall not exceed the original price of similar fixed assets available on the market at the time of valuation.

2/ Prior to implementing the price adjustment of fixed assets, cooperatives must conduct an inventory of fixed assets and physical items, check the recording of data on fixed asset accounting cards and ledgers, and resolve any surplus or shortage issues. Only the original price of existing fixed assets can be adjusted; the value recorded in the accounting books cannot be used to increase the value of fixed assets.

3/ The date for adjusting the price of fixed assets of cooperatives is January 1, 1988.

4/ The newly recalculated original price of fixed assets, as described above, shall serve as the basis for bookkeeping and depreciation calculation from January 1, 1988, and shall not be used for sales or settlements. All transactions involving the sale, purchase, and settlement of fixed assets must comply with the current regulations of the State.

II- OBJECTS OF FIXED ASSETS SUBJECT TO RECALCULATION OF ORIGINAL PRICE:

All fixed assets owned by cooperatives, acquired or used from all sources and still present in the inventory at 0 hours on January 1, 1988, will be subject to recalculating the original price, including:

1/ Fixed assets acquired or constructed using self-owned capital, considered as cooperative-owned capital, and capital obtained through credit.

2/ Fixed assets contributed as shares by members but not yet fully repaid to members.

3/ Fixed assets subsidized by the State, donated, or supported by organizations and individuals to cooperatives.

4/ Fixed assets managed and legally used by cooperatives.

III- CRITERIA FOR FIXED ASSETS:

The labor means of small and handicraft cooperatives shall be classified as fixed assets if they meet both conditions regarding time and value.

- Having a value of 10,000 dong or more.

- Having a usage period of over one year.

After recalculating the original price of fixed assets, labor means that do not meet either of these two criteria will be reclassified as circulating tools.

Specifically, the following labor means, even if they do not meet the value criterion (less than 10,000 dong), may still be considered fixed assets of cooperatives.

- Major labor means of cooperatives in handicraft sectors.

- Simple and mechanical transportation equipment.

- Desks, chairs, wooden cabinets, iron cabinets, refrigerators, safes, ceiling fans, table fans, computers, typewriters, and musical instruments, etc.

- Exhibits in cultural houses, traditional houses, commemorative items, gifts, artistic crafts, specialized books, technical manuals, etc.

IV- DEPRECIATION OF FIXED ASSETS:

1/ When the original price of fixed assets is increased, the corresponding increase in the depreciated value (basic depreciation already deducted) shall also be adjusted according to the ratio between the new and old original prices of the fixed assets, including those that have been fully depreciated (capital recovered) but are still in use and reflected in the cooperative's accounting records.

2/ The deduction of depreciation for fixed assets of cooperatives shall be based on the new original price of the fixed assets. The Department of Finance and the Provincial, Municipal, and Special Zone Cooperative Unions of Small and Handicraft Industries shall refer to Decision No. 307 TC-ĐTXD dated July 22, 1986 of the Ministry of Finance to provide specific guidance on the framework of depreciation rates for each type of fixed asset, allowing cooperatives to apply them flexibly according to their capital recovery needs and business operations.

Determining the depreciation cost to include in the processing and purchasing prices of small and handicraft products shall follow the guidance of the State Price Committee and the Ministry of Finance.

3/ The following fixed assets of cooperatives shall only be subject to basic depreciation and not major repair depreciation:

- Technical and vocational books.

- Working animals and animals for products.

- Desks, chairs, file cabinets, etc., in offices.

- Long-term orchards.

4/ The following fixed assets shall only be subject to major repair depreciation and not basic depreciation:

- Natural ponds, fields, and yards.

- Bridges, roads, canals, and ditches.

5/ Fixed assets that do not require depreciation:

- Assets dedicated to collective welfare.

- Reserve assets and unused assets stored away.

V- ACCOUNTING PROCEDURES FOR HANDLING THE RESULTS OF RECALCULATING THE ORIGINAL PRICE OF FIXED ASSETS:

After recalculating the original price of fixed assets, the cooperative's accountant must rearrange the fixed asset cards, removing those that no longer meet the criteria for fixed assets. Complete the fixed asset files and ensure accurate record-keeping on the cards and ledgers.

The cooperative's accountant must accurately know the quantity, value, structure, and technical condition of fixed assets and promptly reflect any changes in fixed assets.

The accounting method for handling specific results of adjusting fixed asset prices is as follows:

1/ For excess and missing fixed assets. Upon discovery during price adjustment, the cause must be determined and handled according to current regulations.

a. In case of excess fixed assets:

- Fixed assets of the cooperative that are found outside the accounting books need to be recorded on cards, entered into the fixed asset ledger, and accounted for as an increase in fixed assets and fixed capital at their original cost as stated in the fixed asset documentation:

Debit Account 01 - Fixed Assets

Credit Account 85 - Basic Capital (85.1)

If there is no original documentation, new documentation must be created and the original cost will be determined based on the original cost of similar fixed assets.

- Excess fixed assets currently in use must be based on the original cost and depreciation rate to determine the amount of depreciation to be accrued during the usage period to be added to production costs. After accounting for the increase in fixed assets and fixed capital at the original cost as mentioned above, further accounting should be done:

Debit relevant cost accounts

Credit Account 88 (88.1) - Basic Depreciation

Credit Account 86: Major Repair Depreciation

Simultaneously, reduce fixed capital by the amount of basic depreciation already accrued:

Debit Account 85 (85.1)

Credit Account 02

- Excess fixed assets identified as belonging to another entity or where the owner cannot be determined, must report to the owner entity or report to the Cooperative Union or financial authority for instructions on how to handle them.

b. In case of missing fixed assets.

All cases of missing fixed assets must trace the cause, identify the responsible person, and handle according to the current system. Based on the inventory record of missing fixed assets and the original documentation of fixed assets, accountants must record a decrease in the value of fixed assets and fixed capital at the original cost and record a reduction in the amount of basic depreciation already accrued.

Debit Account 85 - Basic Capital (85.1)

Credit Account 01 - Fixed Assets (at original cost)

Debit Account 02 - Depreciation of Fixed Assets.

Credit Account 85 Basic Capital (85.1) Amount of basic depreciation already accrued.

At the same time, transfer the remaining value of the fixed asset (original cost - basic depreciation already accrued) to Account 84 "damaged, missing or excess assets awaiting resolution".

Debit Account 84 (84.1)

Credit Account 88 (88.3)

Based on the outcome of the handling, continue accounting according to the current accounting system.

2/ Accounting for the result of adjusting the original cost of fixed assets.

Based on the consolidated data from Form 1, account for the difference in increased original cost of fixed assets and the depreciated value of fixed assets:

Debit Account 01

Credit Account 85 (85.1): Increase in original cost

Debit Account 85 (85.1)

Credit Account 02 - Increased Depreciation Value

At the same time, credit Account 004 (outside the summary of assets) for the increase in original cost.

3/ Accounting for transferring fixed assets to tools and equipment under labor costs.

Based on the consolidated data from Form 1, the accountant must prepare a list of fixed assets that no longer meet the criteria for fixed assets and are transferred to tools and equipment under labor costs, and determine the amount of depreciation already accrued for accounting purposes:

Debit Account 85 (85.1)

Credit Account 01 - Adjusted Original Cost (1)

Debit Account 02

Credit Account 85 (85.1) Amount of basic depreciation already accrued after adjustment (2)

Debit Account 12

Credit Account 85 (85.2) Remaining value of fixed assets transferred to tools and equipment.

If it is still in use, further accounting should be done:

Debit Account 33

Credit Account 12 (3)

Note: If the fixed asset has not been depreciated and is now transferred to tools and equipment under labor costs, then there is no entry (2).

VI- IMPLEMENTATION

Provincial People's Committees, cities, and special administrative regions directly under the Central Government shall direct the Department of Finance, Price Control Committee, and Cooperative Unions to organize and guide district finance-price departments, cooperative unions at the district, county, and town levels, and cooperatives to implement this Circular.

Cooperatives must establish a steering committee for inventory and adjustment of fixed asset prices, with the cooperative director (or deputy director) serving as the head and the cooperative's chief accountant as the vice-chairman in charge. The steering committee is responsible for organizing the implementation of fixed asset price adjustments for cooperatives and preparing reports on the results of the inventory and price adjustments for approval by the cooperative management board through a member meeting, followed by reporting to the cooperative union and the district finance-price department for review (report using Form 1). The district finance-price department and cooperative union have the responsibility to review and compile the results of fixed asset price adjustments to report to the People's Committee and send to the provincial Department of Finance, Price Control Committee, and cooperative union (report using Form 2).

By the first quarter of 1988, the provincial Department of Finance and Small and Handicraft Industry Cooperative Union must compile the situation and results of fixed asset price adjustments and report to the People's Committee and send to the Central Small and Handicraft Industry Cooperative Union, Ministry of Finance, and State Price Control Committee (report using Form 2, accompanied by a written evaluation of the results of fixed asset price adjustments).

For localities that have directed cooperatives to adjust fixed asset prices before January 1, 1988, if deemed appropriate with the guidance in this Circular, they do not need to readjust the prices but must compile and report the results of the price adjustments according to the provisions of this Circular.

During the implementation process, if there are issues, the provincial Department of Finance, Price Control Committee, and Small and Handicraft Industry Cooperative Union must consult with relevant sectors, report to the People's Committee for resolution. At the same time, report to the Ministry of Finance, State Price Control Committee, and Central Small and Handicraft Industry Cooperative Union for research and supplementary guidance./.