GROUP ASSIGMENT tháng 10 năm 2022 TABLE OF CONTENTS PART 1 DETAILS ON THE ACTUAL CASE OF ACCOUNTING ON INTANGILE ASSETS 1 1 1 Accounting on intangible assets of Vinamilk 1 1 2 Case study analyst 3 PAR[.]
GROUP ASSIGMENT tháng 10 năm 2022 TABLE OF CONTENTS PART DETAILS ON THE ACTUAL CASE OF ACCOUNTING ON INTANGILE ASSETS 1.1 Accounting on intangible assets of Vinamilk .1 1.2 Case study analyst PART ACCOUNTING PROCEDURE ON INTANGILE ASSETS 2.1 Accounting standard – VAS and IAS for intangible assets .4 2.2 Accounting procedures applied on Intangile assets for ERP systems PART SOLUTION OF VINAMILK ON CAPITALIZATION ON INTANGIBLE ASSETS CONCLUSION 12 REFERENCE 13 INTRODUCTION The role of intangible assets in socio-economic development is shown by its increasing proportion compared to tangible assets For example, according to the 1982 census, about 62% of the assets of businesses in the United States were tangible assets, but by 2000 this proportion had decreased to only 30% In a survey of 284 enterprises in Japan in 1993, the value of intangible assets accounted for 45.2% of the total assets of enterprises Dbhalling's research results published on May 24, 2011, citing sources from the US Patent and Trademark Office, showed that Coca Cola business has a total market capital of 110.4 billion USD, of which the Visual assets (factories, offices, machinery, equipment, ) only accounted for 25.3 billion USD, so the value of intangible assets of Coca Cola reached 85.1 billion USD (accounting for 77.08% total capital) Coca Cola has two highly valuable intangible assets, the "secret recipe" for making drinks and the brand (Coke® and Coca Cola®) Other studies also show that McDonald's intangible assets account for 71% of total assets, Disney accounts for 68% of total assets In Vietnam, companies nowadays has recorded more and more intangible assets PART DETAILS ON THE ACTUAL CASE OF ACCOUNTING ON INTANGILE ASSETS 1.1 Accounting on intangible assets of Vinamilk THE APPLICATION OF ENTERPRISE RESOURCE PLANNING (ERP) SYSTEMS ON THE OPERATION OF VINAMILK Vinamilk’s operation before ERP application: Before Vinamilk's ERP system was applied to production and business management activities, only using manual tools such as excel or old software such as Foxpro in management caused many difficulties to Vinamilk Directly affecting business operations: Input and output goods are managed entirely manually, causing the factory to face problems such as: goods are in stock in large quantities while the consumption rate of output products is too slow, not optimal optimize the working capacity and operation of machines, equipment, workers, etc Hence, it costs the whole production process of Vinamilk, directly affecting the profit of the organization Accounting activities by manual method face many difficulties with a large number of archived papers, prone to errors, leading to unexpected loss and damage There is no synchronization in control between stages from production to order processing and accounting, leading to an increase in production costs, warehousing costs, and inventory In addition, the management software used between departments is different, when there is a need to hand over work information and data between departments and departments, users have to manipulate it manually, causing problems It used to take a lot of time and effort, but productivity is low, data is not synchronized, and be easy to lose Application of ERP at Vinamilk: Faced with the challenges of human resource planning, since 2007 Vinamilk's ERP system has been officially implemented The system creates a work management platform across departments and divisions in the company Vinamilk's ERP system supports managers to accurately assess the work efficiency that each employee brings When an employee updates the new job status, the manager also receives a notification This ensures continuous, specific information capture On the other hand, ERP also analyzes the collected data to propose plans and directions to solve difficulties for businesses For example, inefficient positions will be eliminated, replaced by a new, leaner, less risky process One of the outstanding features of ERP software is automatic payment according to business settings As soon as the deadline comes, the payment to the supplier or partner will be automatically done by the system Vinamilk's products have a great influence on consumers' health Therefore, the task of quality control from raw materials, processing, packaging to shipping is always on the top With the ERP system, managers and leaders can easily capture the overview anytime, anywhere From there, they make the most accurate decisions to optimize the workflow Vinamilk is supplying the domestic and international markets with about 200 different product lines Each product line has its own price policy, discount offers… Over time, they put a lot of pressure on control and statistics At this time, the ability to automate and simplify the business of ERP is considered a superior solution It helps the company overcome all difficulties, significantly increase productivity and revenue Full package of ERP systems 1.2 Case study analyst In Vietnam, capitalization of software or computer systems as longterm assets is still brand new issue Value of hardware and software if it meets the standards of identification of tangible fixed assets, intangible fixed assets as prescribed and has documents proving their ownership and approved by a competent authority In Vietnam, when determining the lawful ownership of this property, it shall be depreciated according to regulations According to the provisions of Vietnam Valuation Standards, intangible assets of enterprises, organizations and individuals are classified into the following groups: Intellectual property (brand, trademark, Slogan, reputation ) Intellectual property rights in accordance with the law on intellectual property (copyright, industrial property rights, ) Non-contractual relationships bring economic benefits to the parties, relationships with customers, suppliers or other entities (customer lists, databases ) The right to bring economic benefits to the parties is specified in the civil contract in accordance with the law (the right to exploit minerals, the right to business, the right to emit emissions is transferable) Other intangible assets ERP systems is still new for intangile assets in Vietnam ERP software varies significantly from introductory inventory or accounting software in that it provides functionality across all business operations This includes inventory management, accounting, order entry and processing, warehouse management, contact management, eCommerce integration, barcode scanning and more If your business has become frustrated with managing multiple, standalone solutions, if you’re looking to start selling through new sales channels or have reached user and data limits within your existing system, it’s time to consider ERP software However, it’s important to note that with this decision comes an increase in costs – and rightfully so With more functionality, more automation, robust reporting and integration opportunities, the costs associated with using and setting up ERP are not comparable and can vary significantly from one vendor to the next and from one company to the next Most software systems include costs for software licenses and implementation costs Due to applicable accounting standards, the intrinsic value a startup associates with an IT or intangible asset will rarely be seen on a balance sheet When considering the value of intangible assets, we often think of the future revenues an asset will generate (either through its sale or its use to increase ones’ sales), or in terms of the costs incurred to acquire, create and develop the asset Vinamilk selected the way of accounting on capitalization of ERP systems PART ACCOUNTING PROCEDURE ON INTANGILE ASSETS 2.1 Accounting standard – VAS and IAS for intangible assets Vietnam accounting standard (VAS04) The Vietnam Accounting Standards for intangible assets (VAS 04) were issued in accordance with Decision No 149/2001 / QD-BTC dated December 31, 2001 by the Minister of Finance, which has taken effect from January 1, 2002 The objective of VAS 04 is to provide principles and accouting requirements for intangible assets The main issues dealt in this article are distinguishing intangible assets from intangible resources and when intangible assets are recorded Tangible and intangible fixed assets are the same in terms of recognition conditions of an asset in general, that is, it must generate future economic benefits and must be valued at the same time satisfying the criteria of value and usage time However, the fundamental difference between these two types of assets is that there is a physical form and no physical form Tangible fixed assets all exist in the form of specific physical objects such as buildings, vehicles, machinery and equipment, etc., and their existence is very clear Meanwhile, intangible fixed assets are assets that exist under physical objects whose value is quite small (such as magnetic tapes, magnetic disks, certificates, ) but the economic benefits it brings are greater so many The difference between tangible and intangible fixed assets is quite clear, but in enterprises (enterprises) there are intangible resources (with value and no physical form), so distinguishing intangible fixed assets from resources Intangible assets are necessary in order to present information about intangible fixed assets in the most honest and reasonable financial statements The following four recognition criteria: It is certain that future economic benefits will be obtained from the asset: Future economic benefits that intangible fixed assets bring to enterprises may include: Increased revenue, cost savings, or other benefits, derived from the use of intangible fixed assets If the intangible fixed asset no longer brings economic benefits in the future, it will not continue to be recognised For example, an enterprise buys the copyright to a recipe for a beverage with a value of VND 200 million and in the third year, the enterprise decides not to use this recipe for business activities because it cannot sell goods, so no longer recognize this copyright as an intangible fixed asset Or the enterprise buys the right to exploit the market share of VND 200 million and terminates after one year due to failure in exploitation, then the value of the mining right of VND 100 million will no longer be recorded as an intangible fixed asset The historical cost of an asset must be measured reliably: Enterprises are not allowed to self-record the value of intangible fixed assets, the historical cost of intangible fixed assets is recorded on a reliable basis Intangible fixed assets must have lawful documents to determine the value of formed assets Some enterprises own famous brands in the world such as Louis Vuiton, Hermes Apple, Honda, Samsung, etc The brand value is great, but the enterprises themselves have created over time and prestige, so they cannot be determined value of the brand, therefore, according to accounting standards, intangible fixed assets cannot be recognized Estimated use time over year: Intangible fixed assets must be assets with long-term use, participating in many business operation cycles Satisfy the value criteria according to current regulations: Distinguishing intangible fixed assets from other intangible resources In addition, VAS 04 also distinguishes intangible fixed assets from other intangible resources in the factors that are identifiable, ability to control resources and certainty of future economic benefits International accounting standard (IAS 38) AS 38 Intangible Assets outlines the accounting requirements for intangible assets, which are non-monetary assets which are without physical substance and identifiable (either being separable or arising from contractual or other legal rights) Intangible assets meeting the relevant recognition criteria are initially measured at cost, subsequently measured at cost or using the revaluation model, and amortised on a systematic basis over their useful lives (unless the asset has an indefinite useful life, in which case it is not amortised) IAS 38 was revised in March 2004 and applies to intangible assets acquired in business combinations occurring on or after 31 March 2004, or otherwise to other intangible assets for annual periods beginning on or after 31 March 2004 Intangible asset: an identifiable non-monetary asset without physical substance An asset is a resource that is controlled by the entity as a result of past events (for example, purchase or selfcreation) and from which future economic benefits (inflows of cash or other assets) are expected [IAS 38.8] Thus, the three critical attributes of an intangible asset are: Identifiability control (power to obtain benefits from the asset) future economic benefits (such as revenues or reduced future costs) Identifiability: an intangible asset is identifiable when it: [IAS 38.12] is separable (capable of being separated and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract) or arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations Examples of intangible assets: patented technology, computer software, databases and trade secrets trademarks, trade dress, newspaper mastheads, internet domains video and audiovisual material (e.g motion pictures, television programmes) customer lists mortgage servicing rights licensing, royalty and standstill agreements import quotas franchise agreements customer and supplier relationships (including customer lists) marketing rights 2.2 Accounting procedures applied on Intangile assets for ERP systems Intangible assets are typically nonphysical assets used over the longterm Intangible assets are often intellectual assets, and as a result, it's difficult to assign a value to them because of the uncertainty of future benefits Capitalization of ERP systems includé: Capitalization of ERP = ERP systems prices + ERP implementation costs ERP software implementation costs Software implementation costs are the one-time fees associated with setting up a new software solution and typically include the cost of training employees on how to use the new software, the cost of moving data from any existing systems or spreadsheets into the new system (also known as data migration) and the cost of actually setting up the server environment and configuring the system for your specific company needs Training costs: Training costs tend to make up a significant portion of implementation costs At ERP we estimate these numbers based mostly on users, however, other factors that can have an impact on costs For example, training a large number of people at the same time tends to require more time and effort (for fielding questions etc.), and how quickly training goes will also depend on how familiar your team is with using software, and whether they can dedicate time to focus solely on training (as opposed to getting caught up with day-to-day tasks and pulled into other meetings) To make the training go as smoothly as possible, employees must have the time to dedicate to learning ERP without other distractions Data Migration Data migration is the process of moving company data from your existing systems (accounting, inventory, eCommerce and spreadsheets) into ERP ERP At a minimum, you should consider migrating the following data: Customers with outstanding balances Outstanding AR balances Vendors AP balances Active inventory items Pricing information General ledger balances Opening entries Customization: Major customization is typically identified during ERP’s consultative sales process and therefore built into the initial software costs However, many customers will also identify new custom during the implementation based on existing processes and habits In this situation, we strongly recommend that any custom requests get added to a Wish List for future review This is because many existing processes can be improved or replaced with the implementation of the right ERP system and therefore these custom projects will quickly become obsolete If necessary, this Wish List can then be revisited in the future Configuration/Installation: The last cost included with the implementation process is for configuration and installation ERP’s cloud-based software is hosted on our servers and each customer will have its own server environment configured for your specific company needs Therefore, time is required by our IT team to provision this server environment and configure your version of ERP The time and costs associated with this step will depend on the complexity of your business processes, number of locations, number of business entities, sales structure etc Procedures on accounting of ERP systems Software Capitalization Accounting Rules The accounting for internal-use software varies, depending upon the stage of completion of the project The relevant accounting is noted below Stage Preliminary All costs incurred during the preliminary stage of a development project should be charged to expense as incurred This stage is considered to include making decisions about the allocation of resources, determining performance requirements, conducting supplier demonstrations, evaluating technology, and supplier selection Stage Application Development Capitalize the costs incurred to develop internal-use software, which may include coding, hardware installation, and testing Any costs related to data conversion, user training, administration, and overhead should be charged to expense as incurred Only the following costs can be capitalized: Materials and services consumed in the development effort, such as third party development fees, software purchase costs, and travel costs related to development work The payroll costs of those employees directly associated with software development The capitalization of interest costs incurred to fund the project Stage Post-Implementation Charge all post-implementation costs to expense as incurred Samples of these costs are training and maintenance costs Time to assets capitalization Any allowable capitalization of costs should begin after the preliminary stage has been completed, management commits to funding the project, it is probable that the project will be completed, and the software will be used for its intended function The capitalization of costs should end when all substantial testing has been completed If it is no longer probable that a project will be completed, stop capitalizing the costs associated with it, and conduct impairment testing on the costs already capitalized The cost at which the asset should then be carried is the lower of its carrying amount or fair value (less costs to sell) Unless there is evidence to the contrary, the usual assumption is that uncompleted software has no fair value PART SOLUTION OF VINAMILK ON CAPITALIZATION ON INTANGIBLE ASSETS ERP software was capitalized as intangible assets as followed financial reports and statement: Notes for tangible and intangible assets on Financial statements 2006-2007 (audited) Tangible and intangible fixed assets Fixed assets are stated at historical cost less accumulated depreciation Historical cost includes expenditure that is directly attributable to the acquisition of the fixed assets Depreciation Fixed assets are depreciated on the straight-line method, to write off the cost of the assets to their residual value over their estimated useful lives, as follows: Sources: Annual reports 2007- Vinamilk Notes for software (intabgile assets) on Financial statements 2006-2007 (audited) Picture 01 Presentation of Intangile assets on Balance sheets 2006-2007 10 Sources: Annual reports 2007- Vinamilk Picture 02 Presentation of Intangile assets on Notes 2006-2007 Sources: Annual reports 2007- Vinamilk Value of Software increase from 1,604 millions VND to 18,871 millions VND in 2007 11 CONCLUSION The most valuable brands are the ones with the highest turnover in industries where the brand plays a dominant role The data collection of businesses will be based on the financial statements of the companies Brand is an intangible asset, but it has a great contribution to the operation of the business Vinamilk currently has more than 220 types of products, meeting all the nutritional needs of Vietnamese consumers from children, the elderly, teenagers or the whole family… The continuous launch of nutritional products New nutrition, updating advanced trends in the world such as Organic have helped Vinamilk gain the trust of domestic and foreign consumers Not only worth billions of dollars, Vinamilk is also the most chosen brand by Vietnamese consumers for years in a row according to the "Brand Footprint" report 12 REFERENCE Vinamilk annual report 2007-2020 13 ... intangible assets PART DETAILS ON THE ACTUAL CASE OF ACCOUNTING ON INTANGILE ASSETS 1.1 Accounting on intangible assets of Vinamilk THE APPLICATION OF ENTERPRISE RESOURCE PLANNING (ERP) SYSTEMS ON THE. ..TABLE OF CONTENTS PART DETAILS ON THE ACTUAL CASE OF ACCOUNTING ON INTANGILE ASSETS 1.1 Accounting on intangible assets of Vinamilk .1 1.2 Case study analyst PART ACCOUNTING. .. terms of the costs incurred to acquire, create and develop the asset Vinamilk selected the way of accounting on capitalization of ERP systems PART ACCOUNTING PROCEDURE ON INTANGILE ASSETS 2.1 Accounting