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THE MINISTRY OF
FINANCE
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SOCIALIST REPUBLIC OF
VIET NAM
Independence - Freedom – Happiness
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No. 14/1998/TT-BTC
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Hanoi, February 5,
1998
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CIRCULAR
GUIDING THE FINANCIAL MANAGEMENT AND BUSINESS
COST-ACCOUNTING REGIME APPLICABLE TO STATE ENTERPRISES ENGAGED IN INDEPENDENT
AUDITING ACTIVITIES
In furtherance of Decree No.59-CP of October
3, 1996 of the Government issuing the "Regulation on the financial
management and business cost-accounting applicable to State enterprises",
the Ministry of Finance hereby provides the following guidance on the financial
management regime applicable to State enterprises engaged in independent
auditing activities (hereafter referred to as auditing enterprises for short):
I. GENERAL PROVISIONS:
1. This Circular applies to State enterprises
doing business in the fields of auditing, financial and accounting consultancy
and other service activities according to their functions stated in their
operation statutes.
2. Auditing enterprises assigned by the State
the capital, land and other resources shall have to efficiently use, preserve
and develop the capital assigned to them; have civil rights and obligations and
take own responsibility for their business activities.
3. Auditing enterprises (including their
attached branches) shall submit to the inspection and supervision by the
financial agency in its capacity as a State management agency and the owner's
representative over the State capital and property at enterprises according to
the Government's mandate.
II. SPECIFIC PROVISIONS:
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1. Auditing enterprises shall be provided with
the initial statutory capital by the State upon their establishment, which
conform to the auditing service's legal capital level prescribed in Decree No.
50-CP of August 28, 1996 of the Government. In the course of business
activities, the State may, when necessary, consider and allocate additional
capital to the enterprises for performing additional tasks assigned by the
State.
2. The State shall allocate State-owned capital
to auditing enterprises. Such capital allocation shall comply with the
provisions of the Law on State Enterprises and other provisions of law.
3. Auditing enterprises shall be entitled to use
their capital and funds for business activities on the principle of
"efficient use, preservation and development of capital". In cases
where the sources of capital and funds are used for purposes other than the
prescribed ones, the principle of "repayment" must be observed.
4. Capital management:
4.1. Auditing enterprises shall be entitled to
use capital, property and the land use right under their management for outside
investment. Particularly, the use of the "land use right" for
investment outside the enterprises must comply with the provisions of the Land
Law.
When making investment outside the enterprises,
auditing enterprises shall have to abide by the provisions of law, refrain from
altering their form of ownership, and to ensure the principle of efficient use,
preservation and development of capital, increasing revenues and not affecting
their principal business tasks assigned by the State.
4.2. Forms of outside investment by auditing
enterprises include:
- Purchase of bonds, bills and equities;
- Entering into joint ventures or contributing
shares to other enterprises.
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6. Auditing enterprises shall comply with the
regime on the deduction and use of fixed assets depreciation. All the money derived
from the depreciation of the State's fixed assets shall be left to the
enterprises for reinvestment, replacement and renewal of fixed assets and for
use to meet the business demands in accordance with the State regulations
7. Auditing enterprises shall be entitled to
mobilize capital in the forms of borrowing, accepting capital contributions as
well as other forms prescribed by law. The capital mobilization must comply
with current provisions of law (without altering the State ownership form of auditing
enterprises).
8. Property management:
8.1 Auditing enterprises shall re-evaluate their
property in the following cases:
- Inventorying and re-evaluating property by
decision of the State;
- Using property for entering into joint venture
or making capital contributions (upon contributing and receiving back property
for both cases);
- Equitizing or diversifying the ownership
forms;
- Adjusting the prices for ensuring the real
value of the enterprise.
8. 2. The inventory and re-evaluation of
property must comply with the State regulations. Any increase or decrease in
value due to the property re-evaluation shall be accounted as capital increase
or decrease after the financial agency so approves.
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When liquidating property, enterprises shall
have to set up a liquidation board. and when selling the liquidated property an
auction must be held in accordance with the provisions of law.
Within 10 days after liquidating its property,
the enterprise shall have to report to the agencies that manage State capital
and property at enterprises and the agencies that has decided the establishment
of enterprises.
The increase or decrease difference between the
value earned from the liquidation of property and the remaining value of the
liquidated property as well as the sale or liquidation costs (if any) shall be
accounted in the business result of the enterprise (other revenues).
10. Auditing enterprises shall have to preserve
the capital allocated by the State according to the following provisions:
- Abiding by the State regulations on capital
and property management and use.
- Buying property insurance according to the
State regulations.
- Being entitled to account in the business
costs the following reserves:
+ The reserve for the price decrease of goods
left in stock, which is the amount of price decrease of supplies and goods left
in stock expected to occur in the following business period.
+ The reserve for the price decrease of the
hard-to-recover debts: which is the debt value expected to be lost in the
following business period because debtors are incapable of repayment.
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The setting up and use of these reserves shall
comply with the State regulations.
SECTION 2.- TURNOVER -
BUSINESS EXPENSES
I. Turnover from an auditing enterprise's
business activities is the total amount of money earned by the company's
office, branches and representative offices attached to the company, including
turnover from business activities and other activities. Concretely:
A. Business activities
1. Turnover from auditing activities:
- Auditing of financial statements;
- Auditing of the settlements of capital
construction works;
- Auditing of projects;
- Auditing to determine the value of property
for equitization, merger, dissolution; making capital contributions to joint
ventures, etc.;
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2. Turnover from consultancy activities:
- Consultancy on financial management,
accounting and tax laws;
- Consultancy at the specific requests of
customers.
3. Turnover from other business activities:
- Installation of computer software programs;
- Sale of documents;
- Training;
- Earnings from contractual business cooperation
activities.
B. Other activities
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1.1. Turnover from financial activities:
earnings from the lease of property (buildings, means, vehicles...)
1.2. Revenues from financial activities:
- Deposit interests;
- Loan interests;
- Revenues from the sale and purchase of bonds,
bills and shares...;
- Revenues from joint venture activities,
equities...
2. Turnover from irregular activities including:
revenues from irregular activities such as:
- Revenues from the sale of fully depreciated
means and instruments which are damaged or no longer in use;
- Payable amounts which are not required to be
paid for the reasons from the creditor(s);
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- Bad debts already written off but now
recovered;
- Unused portion of the reserve earmarked in the
previous year for bad debts.
- Other irregular revenues.
All the turnover of an auditing enterprise
arising in each business period must be indicated in valid invoices as well as
vouchers and fully recorded in accounting books according to the State
regulations.
Enterprises shall have to determine and clearly
indicate taxable turnover amounts for each kind of activity in accordance with
the provisions of tax laws, decrees and guiding circulars currently in force.
Any turnover or revenue of an enterprise not
included in accounting books shall be repaid into the State budget and a fine
shall be imposed thereon according to current regulations.
2. The levels of the auditing and consultancy
fees shall be negotiated by the two parties (the auditing enterprise and the
customer) on the basis of:
- The volume and the complexity of the work to
be audited;
- The domestic and foreign market prices of
auditing (in case of contracts for auditing international projects)'
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- Ensuring adequate expenditures and proper
percentage of profits.
3. Unfinished products of auditing enterprises
are auditing and consultancy contracts which are halfway performed at the end
of the calendar year (the fiscal reporting year) reflecting:
- Incomplete costs of the provision of auditing
and consultancy services, which have arisen;
- Auditing and consultancy fees which are not
fully collected or the to-be-collected amounts have not been determined yet due
to the unavailability of the contract liquidation report;
- Money collected in advance from customers
which are the capital advanced by the customers for the work designated in the
signed contract.
4. Expenditures of an auditing enterprise
include: expenses for each auditing or consultancy activity; financial activity
and other activities and general expenses for its activities.
The directors of auditing enterprises shall have
to make an estimate of annual business expenditures which shall serve as a
basis for running business and managing their enterprises' expenses.
Expenses for each activity:
A. Business activities:
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- Remunerations for laborers not managed by the
enterprise such as collaborators, technical engineers, specialists.
- Costs of translation and printing of documents
and making auditing reports.
- Occupational insurance (or the risk reserve
fund because of the absence of occupational insurance in Vietnam).
2. Expenses for consultancy activities:
- Remunerations for laborers not managed by the
enterprise.
- Occupational insurance (or the risk reserve
because of the absence of occupational insurance in Vietnam).
3. Expenses for other business activities:
3.1 Expenses for the installation of computer
software programs.
3.2 Expenses for the sale of documents.
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- Sale expenses: packaging and marketing;
- The reserve fund for the price decrease of
goods left in stock.
3.3 Expenses for training services:
- Expenses for compilation of materials;
- Expenses for printing teaching materials;
- Classroom rental;
- Payments to lecturers: tuition fee, lodging,
meals and travel.
- Spendings on drinks for the training course;
- Spendings on stationery for the training
course;
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- Expenses for the opening and closing
ceremonies of the training course.
3.4. Expenses for activities under business
cooperation contracts.
B. Other activities:
1. Expenses for financial activities (lease of
buildings, financial investment):
- Depreciation of leased buildings;
- Repair of leased property;
- Maintenance.
2. Expenses for irregular activities:
- Expenses for the sale or liquidation of fixed
assets (including the remaining value of the liquidated or sold fixed assets);
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- Expenses for the recovery of written-off
debts;
- Other irregular expenses.
General expenses for all activities
(apart from expenses for each above-mentioned
activity)
- Pays for laborers (managed by the enterprise);
- Social and medical insurance premiums, the
trade union's fund according to the wage fund;
- Depreciation of the enterprise's fixed assets
(according to the proportion registered with the State);
- Labor tools, office equipment....
- Stationery for the enterprise's employees;
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- Expenses for workshops and professional
training;
- Expenses for publicizing and advertising the
enterprise's activities;
- Expenses for property repair;
- Expenses for insurance of the enterprise's
property;
- Expenses for clothing (as prescribed by the
State);
- Expenses for quarterly and annual preliminary
reviews and sum-up meetings...
- Foreign mission tours:
+ Study tours abroad;
+ Overseas training.
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- Expenses for recruitment of employees, grade
promotion and skill raisin and training of cadres to improve their knowledge.
- Expenses for working trips: hiring of means,
accommodation, residence...
- Expenses for marketing, public relations and
receptions. The spending level is prescribed in Decree No. 59-CP with specific
items according to the characteristics of the auditing service;
- Renting working offices (if any);
- Severance allowances for laborers as
prescribed in Decree No. 198-CP of December 3, 1994;
- Reserve for bad debts (if any);
- Membership fees paid to associations related to
the enterprise's business activities;
- Costs of electricity, water, telephones...
- Taxes and fees (of tax nature) to be remitted
to the budget such as:
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+ License tax
+ Land rent.
- Expenses for auditing the enterprise;
- Other expenses (apart from those listed
above).
The above-mentioned expenses shall be accounted
according to the actual expenses approved by the enterprise's director who
takes own responsibility for his/her decisions.
All expense vouchers must be rational and valid
according to the State regulations. The person who decides expenditures which
are at variance with the prescribed regime shall have to make compensation
therefor.
Regarding wage payments: Enterprises shall base
themselves on Circulars No. 13/LDTBXH-TT and No. 14/LDTBXH-TT of April 10, 1997
of the Ministry of Labor, War Invalids and Social Affairs to elaborate labor
norms. On the basis of the registered labor norms and the wage regime
prescribed by the State, enterprises shall elaborate the unit price of wages
and submit them to the competent agency for approval.
The deduction for setting up the wage fund and
its use must be based on the approved unit price of wages and the business
efficiency achieved by the enterprise in each period.
Annually, each enterprise shall have to settle
its wage fund with the agency that has decided to establish the enterprise, the
agency that manages State capital and property at enterprises and the tax
agency.
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1. The profit of an auditing enterprise is the
total of profits of dependent cost-accounting branches summed up and determined
at the parent enterprise, which is the difference between the total revenues
and the total expenditures (expenditures plus turnover tax) at each attached
unit:
The auditing enterprise's profit = Total
revenues - (total expenditures + turnover tax)
Profits shall be separately determined for each
activity.
2. The annual total profit of an auditing
enterprise is distributed as follows:
2.1. Profit tax payment according to law;
2.2. Payment of the levy on the use of State
budget capital;
2.3. Payment of such fines as:
- Fines on the violations of the budget
collection and payment discipline;
- Fines on administrative violations;
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- Valid expenses not yet subtracted when the
payable profit tax is determined.
2.4. Offsetting those losses which have not been
subtracted from the pre-tax profit;
2.5. After the four aforesaid items, the enterprise
shall be allowed to deduct the remaining profit to set up various funds as
follows:
- The development investment fund: deducting at
least 50% of the remaining profit without any limit on the maximum amount;
- The financial reserve fund: deducting 10% -
the fund's balance must not exceed 25% of the enterprise's statutory capital;
- The reserve fund for job loss allowances:
deducting 5% - the fund's balance must not exceed the amount equivalent to six
months' wages.
- After making deductions to set up the three
aforesaid funds the enterprise is allowed to further deduct the remaining
profit to set up the welfare fund and the reward fund according to the
following regulations:
+ Not exceeding three months' actual wages if
the ratio between the profit and the fiscal year's capital is not lower than
that of the previous year.
+ Not exceeding two months' actual wages if the
ratio between the profit and the fiscal year's capital is lower than that of
the previous year.
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3. Auditing enterprises are allowed to use the
following concentrated funds:
3.1. The development investment fund:
The development investment fund shall be
concentrated and managed by the auditing enterprise, used to meet the
enterprise's investment requirements according to the State regulations.
3.2. The financial reserve fund: is used to
offset property losses and damages incurred by the enterprise in the course of
business activities and deducted to form the parent enterprise's financial
reserve fund (if it is the financial reserve fund of a dependent unit).
3.3. The reserve fund for job loss allowances:
is spent on:
- Training of employees due to the structural or
technological change;
- Fostering of laborers to improve their
professional skills;
- Allowances for laborers who regularly work at
the enterprise now lose their jobs as prescribed by Decree No. 72-CP of October
31, 1995.
3.4. The reward fund is used for:
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- Giving irregular rewards to the enterprise's
individual employees or collectives with technical innovations that yield
business efficiency. The reward level shall be decided by the director;
- Giving rewards to individuals and collectives
outside the enterprise that have economic contract relations with the
enterprise and have well fulfilled the contract conditions and made many
contributions to the enterprise's business activities. The reward level shall
be decided by the director.
3.5. The welfare fund is used for:
- Investment in constructing or repairing the
enterprise's welfare facilities;
- Public welfare activities of the collective of
the enterprise's employees, social welfare;
- Difficulty allowances, including cases of
retirement due to loss of working capacity..., the allowance level shall be
decided by the director after consulting the enterprise's trade union.
SECTION 4.- OBLIGATIONS TOWARD
THE STATE BUDGET
Auditing enterprises shall have to fulfill all
the obligations towards the State budget in accordance with the tax legislation
currently in force.
SECTION 5.- ACCOUNTING,
STATISTIC AND AUDITING REGIME
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- The accounting regime shall comply with
Decision No. 1141-TC/QD/CDKT of November 1, 1995, taking into account peculiar
characteristics of auditing activities in an appropriate manner (approved by
the Ministry of Finance);
- The financial reports of enterprises must be
audited according to law.
- The director of an enterprise shall have to
draw up the settlement of revenues and expenditures of the enterprise,
including its attached branches, make public the enterprise's financial status
under the guidance of the Ministry of Finance and be accountable before law for
the data publicized.
- The financial agency shall have to inspect and
supervise the publicized data of the enterprise, including its attached
branches.
SECTION 6.- FINANCIAL PLANNING
WORK
The directors of auditing enterprises shall make
annual financial plans in conformity with the business plan and register them
with the Ministry of Finance. Every quarter and in the end of each year, they
shall report to the Ministry of Finance the situation of the implementation of
the business plan and the financial plan according to the form prescribed by
the State.
III. IMPLEMENTATION PROVISIONS
1. This financial mechanism takes effect 15 days
after its signing.
2. Apart from the provisions above, auditing
enterprises shall have to fully comply with the State financial regimes
currently in force.
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In the course of implementation any arising
problem should be promptly reported to the Ministry of Finance for handling.
THE MINISTRY OF
FINANCE
VICE MINISTER
Pham Van Trong