Essay on accountingtopic accounting for fixed assets in vietnam

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ACCOUNTING AND AUDITING *** ESSAY ON ACCOUNTING TOPIC: ACCOUNTING FOR FIXED ASSETS IN VIETNAM Student name: Le Thi Khanh Hoa Student ID : 11204059 Class : Accounting in English integrated with ICAEW CFAB Intake Supervisor : 62 : Master Dang Thi Tra Giang Hanoi, 2023 TABLES OF CONTENT INTRODUCTION CHAPTER 1: OVERVIEW AND ACCOUNTING TREATMENT FOR FIXED ASSETS AT ENTERPRISES IN VIETNAM 1.1 Overview about accounting fixed assets at enterprises in Vietnam 1.1.1 The definition and characteristics of fixed assets 1.1.2 Classification of fixed assets .5 1.1.3 Terms of recognition 1.1.4 Valuation of fixed assets 1.1.5 The role of fixed assets at enterprise .13 1.1.6 Principles of fixed assets management and the role of accounting for fixed assets at enterprises 14 1.2 Accounting treatment for fixed assets at enterprises in Vietnam 15 1.2.1 Accounting for increase and decrease in fixed assets .15 1.2.2 Accounting for fixed asset depreciation 28 1.2.3 Accounting for repair and upgrade fixed assets 31 1.3 Presentation of fixed assets in the financial statements 35 1.4 Comparison in accounting fixed assets according to VAS and IFRS 35 1.4.1 AIS 16 vs VAS 03 about tangible fixed asset 36 1.4.2 AIS 38 vs VAS 04 about intangible fixed asset 36 CHAPTER 2: EVALUATIONS AND RECOMMENDATIONS 40 2.1 Evaluations of accounting treatment for fixed assets in Vietnam 40 2.1.1 Advantages 40 2.1.2 Disadvantages 41 2.2 Recommendation for accounting procedure for fixed assets in business in Vietnam 42 2.2.1 Recommendations for state management agencies 42 2.2.2 Recommendations for businesses 43 CONCLUSION 46 REFERENCES 47 This is a preview LIST OF FIGURES Do you want full access? Go Premium and unlock all 47 pages Figure 1.1: Accounting for increase in fixed assets3 Figure 1.2: Accounting for decrease in fixed assets Access to all documents Figure 1.3: Accounting for fixed asset depreciation0 Figure 1.4: Accounting forGet repair & upgrade Downloads fixed asset Unlimited Improve your grades Upload Share your documents to unlock Free Trial Get 30 days of free Premium INTRODUCTION In today's era of globalization, particularly since Vietnam's integration into the World Trade Organization (WTO), it is sure that competition between the domestic economy and global counterparts is unavoidable This presents Vietnamese businesses with a profound challenge regarding the optimal utilization of capital The youthfulness and lack of international market experience of the domestic economy intensify the difficulty of this question for managers and accountants in these enterprises To carry out production and business activities, three factors must converge: labor force, labor materials, and labor capacity Among them, labor materials are crucial, and fixed assets are labor materials with high value and long-term usage Fixed assets play a direct role in business processes, and their depreciation gradually becomes part of operating costs or product expenses through depreciation Achieving a full return on the initial investment requires multiple business cycles for fixed assets Accounting serves as a potent tool within a business's fixed asset management system Fixed asset accounting provides valuable insights into the status of a company's fixed assets from various perspectives Based on this information, managers can make accurate analyses to make economic decisions Therefore, fixed asset accounting is an essential task and forms a part of a business's overall strategy It aids managers in efficiently managing initial investment capital, implementing rational production and business operations, and defining the correct directions to enhance efficiency in the production and business processes, thereby asserting the company's position in the market Based on the importance mentioned above, I have chosen the topic "Accounting for Fixed Asset in Vietnam" as the subject for my essay CHAPTER 1: OVERVIEW AND ACCOUNTING TREATMENT FOR FIXED ASSETS AT ENTERPRISES IN VIETNAM 1.1 Overview about accounting fixed assets at enterprises in Vietnam 1.1.1 The definition and characteristics of fixed assets 1.1.1.1 The definition of fixed assets Fixed Asset is the term used for major labor materials and other valuable assets that participate in many production and business cycles, and their value gradually shifts, in part, to the value of the products and services produced during the period Fixed assets can be assets that exist in physical form, such as buildings, machinery, equipment, management tools, collectively known as tangible fixed asset, or they can be assets that not have physical form but still participate in many production and business cycles, such as land use rights, patent rights, collectively known as intangible fixed assets 1.1.1.2 The characteristics of fixed assets When participating in business production activities, fixed assets have the following characteristics: - Fixed assets are primarily large-valued and long-lasting materials Fixed assets participate in many different production cycles but still maintain their original physical form until they are damaged - The value of fixed assets is gradually depreciated and transferred to the value of newly created products, while the entire value of raw materials is directly transferred to the product, which is the basis for calculating the cost - Fixed assets go through many business cycles before completing a full return on the initial capital investment for purchasing fixed assets, therefore businesses must manage fixed assets in terms of both value and physical condition 1.1.2 Classification of fixed assets 1.1.2.1 Classification according to the nature of fixed assets According to this classification method, fixed assets are divided into tangible fixed assets and intangible fixed assets, in which: ● Tangible fixed assets: Include assets with physical form that the enterprise holds for use in appropriate production and business activities according to accounting standards Specifically: This is a preview + want Buildings structures Go encompass variousand typesunlock of functional buildings such Do you fulland access? Premium all 47 pages as residential houses, factories, housing for workers, warehouses, shops, tanks, bridges, and wells used in production Accessinclude to allpower documents + Machinery and equipment machinery, working machinery, and other equipment utilized for production and business purposes Get Unlimited + Vehicles and transmission equipmentDownloads comprise automobiles, tractors, ships, and boats used for transportation, as well as water pipelines, steam pipelines, your grades gas pipelines, powerImprove transmission systems, and communication systems + Management equipment and tools refer to devices employed in business management, administrative management, and measurement and testing processes + Perennial trees and working and product-producing animals, like buffalo, cattle, and fruit trees, are found in agricultural enterprises documents unlockthat not fit into the + Other tangible fixedShare assetsyour encompass fixedtoassets aforementioned groups  Intangible fixed assets: Include assets without physical form but have a determined value These assets are owned and utilized by the enterprise in its production and business activities, providing services, or leased to other parties in accordance with accounting standards Intangible fixed assets can be classified into specific cases as follows: Get 30 days of free Premium + Land use rights with a time limit: This encompasses the total actual cost associated with land use, including expenses incurred to acquire land use rights, compensation costs, and land leveling expenses + Trademarks: This refers to the cost incurred by the enterprise to obtain the right to use a specific trademark or brand for its goods + Publishing rights: This represents the cost incurred by the enterprise to obtain the right to publish certain types of books, newspapers, magazines, and cultural and artistic publications + Transfer licenses and other licenses: The cost that the enterprise spends to obtain licenses to transfer rights and other licenses to perform certain tasks + Copyrights, patents: The cost that the enterprise has to pay for research projects, trial production granted by the State + Formulas and preparation methods, design models, etc: These are costs that the enterprise incurs to acquire intellectual property rights related to certain formulas, recipes, design patterns, etc Upload Free Trial 1.1.2.2 Classification of fixed assets by function Under this classification, a company's fixed assets are divided into several types: - Fixed assets in use for business purposes: including fixed assets used for sales activities, enterprise management, or other business activities such as investment, leasing… - Idle fixed assets: including fixed assets allowed to be reserved for future use Fixed assets waiting for processing: including damaged fixed assets waiting - for liquidation, unused fixed assets waiting for transfer or disposal, or fixed assets lacking waiting for resolution Fixed assets used for welfare, career, national security and defense - Fixed assets held and guarded for others 1.1.2.3 Classification of fixed assets by ownership rights Under this classification, a company's fixed assets are divided into: ● Fixed assets owned by the owner of the enterprise: These are fixed assets constructed, purchased and formed from sources of capital from the government, higher authorities, loans, joint venture capital, funds of the enterprise, and fixed assets gifted to the enterprise ● Leased fixed assets: These are fixed assets formed from leasing for use, they are not own by the enterprise When leasing assets, the enterprise agrees with the lessor to transfer the right of assets usage to the lessee for a specified period in exchange for rental payment, which can be made once or multiple times Depending on the lease contract, they can be classified as financial lease fixed assets and operating lease fixed assets - Financial lease fixed assets: These refer to leased assets where the lessor transfers a majority of the risks and benefits related to asset ownership to the lessee At the conclusion of the lease term, ownership of the asset may be transferred to the lessee - Operational lease fixed assets: These are fixed assets that the lessee is granted the right to manage and utilize for a specific duration as defined in the contract However, the lessee is obligated to return the assets upon the expiration of the lease term 1.1.2.4 Classification of fixed assets by the source of asset formation ● Fixed assets formed by owner's equity: These are fixed assets formed by the owners' contributions, joint ventures, or partnerships, and those formed by government budget funding ● Fixed assets formed by borrowing, long-term debt, gifts, etc 1.1.3 Terms of recognition ● Tangible fixed assets are assets with physical form held by enterprises for production and business activities that meet the criteria for recognizing them as tangible fixed assets, as defined by Vietnam Accounting Standard No.03 Tangible fixed assets actively engage in various business cycles while maintaining their original physical state until they become fully damaged, undergo gradual value depreciation, and gradually contribute to the value of new products involved in production or manufacturing To be considered as a tangible fixed asset, an asset must satisfy the following three conditions simultaneously: + It is certain that economic benefits will be obtained in the future from using the asset + Estimated useful life is at least one year + The initial cost of the asset can be accurately determined and is valued at VND 30,000,000 or higher (Circular No.45/2013/TT-BTC on depreciation of fixed assets dated April 25, 2013), ● Intangible fixed assets are assets that have no physical form but hold value and are utilized in production, business operations, or rented out to other entities, in line with the criteria outlined in Vietnam Accounting Standard No 04 To be recognized as intangible fixed assets, these assets must fulfill the definition of intangible fixed assets and meet four criteria similar to those for recognizing tangible fixed assets Unlike tangible assets, intangible fixed assets not possess specific physical form and instead represent a certain amount of invested value Therefore, intangible fixed assets are difficult to identify separately, and when determining intangible resources, it is necessary to consider factors such as determinability, controllability of resources, and certainty of economic benefits in the future Assets recognized as intangible fixed assets they must meet the definition of intangible fixed assets as well as fulfill the four criteria for recognition similar to the recognition criteria for tangible fixed assets Intangible fixed assets not have a specific physical form, but only represent an invested value Hence, identifying intangible fixed assets individually can be challenging Therefore, it is crucial to consider factors such as identifiability, controllability, and assurance of future economic benefits when determining intangible resources that meet the criteria for being classified as intangible fixed assets + Identifiability: Intangible fixed assets must be able to be identified separately in order to be leased or sold independently + Controllability: The company must have the ability to control the asset, control the benefits received, bear the related risks associated with the asset, and have the ability to prevent other parties from accessing the asset + Future economic benefits: The company can obtain future economic benefits from intangible fixed assets in various forms 1.1.4 Valuation of fixed assets This is a preview Determine the original Go cost of fixed assetsand unlock all 47 pages Do 1.1.4.1 you want full access? Premium Determining the initial cost of fixed assets is an essential requirement for accounting for fixed assets, calculating depreciation, and analyzing and evaluating the Access to all documents production capacity, equipment condition, and efficiency of fixed capital utilization within the enterprise Considering the nature of high-value fixed assets that play a Unlimited Downloads significant role in multipleGet business cycles, their value gradually decreases over time As a result, it is crucial to track two types of prices in the accounting records: the initial value and the residual value throughout the asset's usage period Among these, Improve your grades the original cost (or initial value) serves as the foundation for depreciation calculations and determining the carrying amount ❖ Determine the original cost of tangible fixed assets The initial value (original cost) of fixed assets is the total cost that the enterprise has to pay to acquire fixed assets up to ready-for-use state According to the historical Upload Share your documents to unlock cost principle, fixed asset must be determined at the original cost and depending on each case to determine the original cost of tangible FA ● Tangible fixed assets purchased: The original cost of these assets includes the purchase price (minus commercial discounts or discounts), taxes (excluding taxes refunded) and direct costs related to putting the assets for immediate use, such as: Free Trial Preparation costs for premises, initialoftransport loading and unloading costs; Get 30 days free Premium installation and trial run costs (excluding recoveries from trial products, scrap), expert fees and other directly relevant costs When determining the original cost of tangible fixed asset formed by purchasing, it is necessary to pay attention to the following special cases: - In the case of tangible fixed asset purchases being houses, construction works attached to land use rights, the value of land use rights is separately determined and recorded as intangible FA - In the case of purchasing tangible fixed assets with deferred payment, the original cost of the asset is recorded at the immediate purchase price paid at the time of purchase Any difference between the total amount payable and the immediate purchase price is allocated as expenses over the payment term, unless it is capitalized as part of the original cost of the tangible fixed asset based on the provisions of the "Borrowing Cost" standard - Expenses incurred, such as administrative management costs, general production costs, trial running costs, and other unrelated costs, are not included in the original cost of tangible fixed assets unless they directly pertain to the purchase and preparation of the assets for use Initial losses caused by machinery not functioning as intended are considered as production and operational costs for the respective period ● Tangible fixed assets resulting from construction investment through bidding: In this scenario, the cost of tangible fixed assets comprises the settlement price of the investment project, other directly associated expenses, and any pre-emption fees, (if any) ● Self-construction or self-production tangible fixed assets: The cost of these assets includes the actual expenses incurred for self-construction or self-production, along with installation and trial running costs If a company utilizes its own products to transform them into tangible fixed assets, the cost consists of the production cost of the product and any direct expenses linked to preparing the asset for use However, costs such as internal interest, unreasonable material costs, waste materials, excessive labor expenses, or other unnecessary costs incurred during the self-construction or self-production process are not considered part of the asset cost ● Tangible fixed assets acquired through exchange: When tangible fixed assets are obtained through an exchange involving dissimilar tangible fixed assets or other assets, the cost is determined based on the fair value of the received tangible fixed assets or the fair value of the assets being exchanged, adjusted for any additional payments or receipts of equivalent value In the case of exchanging for similar tangible fixed assets or assets that can be sold in exchange for ownership of similar assets (assets with comparable functions, in the same industry, and with equivalent values), the cost is the residual value of the assets being exchanged ● Tangible fixed assets granted: Tangible fixed assets granted within the same granting system and transferred internally according to the decision of the higher level shall have their original cost determined based on the price recorded in the accounting books of the granting entity and the transferring entity In case the tangible fixed assets are granted outside of the granting system, their original cost shall be determined based on the remaining value or revaluation price determined by the handover-receiving council, plus transportation, upgrading, installation, trial operation costs, and registration fee (if any) that the receiving party has to pay until the assets are ready for use ● Tangible fixed assets received as capital contributions, received back capital contributions: The value of tangible fixed assets received as capital contributions or received back as capital contributions is agreed upon by the members, founding shareholders; or agreed upon by the enterprise and the contributors; or valued by professional organizations according to the law and approved by the members, founding shareholders ❖ Determine the original cost of intangible fixed assets The original cost of intangible fixed assets is determined based on each specific case 10 This is a preview Dr 133 full Deductible VAT (1332) (if any) Do you want access? Go Premium and unlock all 47 pages Cr 111, 152, 153, 334, 338 - When the overhaul of fixed assets is completed, and carry forward the actual Access to all documents incurred overhaul cost, the following accounts shall be recorded: Dr 335 - Accrued expenses Get Unlimited Downloads - Cr 2413 - Major repair of fixed assets The accountant shall handle the difference in the actual amount of major Improve your grades repair costs compared with the amount deducted in advance according to the plan (if any): + If the actual arising amount is greater than the deducted amount, the Upload additional deduction will be made: Dr 623, 627, 641, 642 Share your documents to unlock Cr 335- Accrued expenses + If the actual arising amount is smaller than the deducted amount, record a decrease in cost, record: Dr 335- Accrued expenses Cr 623, 627, 641, 642 Free Trial 30 days of free Premium b If the enterprise does Get not have a plan to accrue the cost of major repair of fixed assets in advance - Actual overhaul cost incurred shall be recorded as follows: Dr 2413 - Overhaul of fixed assets Dr 133 - Deductible VAT (1332) (if any) Cr 111, 112, 331 - When major repair works are completed, carry over the major repair cost for gradual distribution, the following accounts shall be recorded: Dr 623, 627, 641, 642 (if the value is small) Dr 242 - Prepaid expenses (if their value is great, they must be allocated gradually) Cr 241 - Construction in progress (2413) For expenses that need to be allocated, the accounting period shall determine the amount of allocation calculated in the production and business costs of each period, record: Dr 623, 627, 641, 642 Cr 242 - Prepaid expenses 1.2.3.3 Accounting for major repairs of fixed assets in upgrading  When incurred major repair costs which are to upgrade tangible fixed assets 33 This is a preview recognition, the following accounts shall be recorded: Do after youinitial want full access? Go Premium and unlock all 47 pages Dr 2413 - Overhaul of fixed assets Dr 133 - Deductible VAT (1332) (if any) Access to all documents Cr 111, 152, 331, 334  When the repair, upgrade or renovation is completed and the fixed asset is put Get Unlimited Downloads into use, the following accounts shall be recorded: Dr 211- Tangible fixed assets Improve your grades Cr 2413 - Major repair of fixed assets Upload Share your documents to unlock Free Trial Get 30 days of free Premium Figure 1.4: Accounting for repair and upgrade fixed assets  Illustrative case On September 10, 2020, Comat Co., Ltd purchased and put into use a new set of machines The technical requirements of the machine need to change maintenance supplies every months of operation with the estimated cost according to the company's quotation of 90,000,000 VND/time On December 31, 2020, the company deducts 45,000,000 VND in advance for maintenance costs in 2020; On March 15, 2021, the company carried out the first maintenance, the total actual cost incurred was 92,000,000 VND VAT 10%;  Related document: contract, payment record  Journal entry: - 31/12/2020: Dr 154: 45,000,000; 34 This is a preview Cr 352:full 45,000,000 Do you want access? Go Premium and unlock all 47 pages - 15/3/2021: Dr 352: 45,000,000; Access to all documents Dr 154: 47,000,000; Dr 1331: 9,200,000; Get Unlimited Downloads Cr 331: 101.200.000 VND Improve your grades 1.3 Presentation of fixed assets in the financial statements The current regulations not require separate financial statements for fixed assets accounting Instead, the economic indicators and certain related aspects of fixed assets are recognized and reflected in the financial statements Upload In the balance sheet: tangible fixed assets are represented by code 221, intangible your documents to unlock fixed assets are representedShare by code 227, the original cost of fixed assets is reflected by codes 222 and 228, the accumulated depreciation is reflected by codes 223 and 229 These items are classified as Non-current Assets under the Assets section of the financial statements Free Trial Tangible fixed assets (code 221) and intangible fixed assets (code 227) represent the remaining value of all typesGet of fixed assets thePremium reporting date 30 days of at free The original cost (codes 222 and 228) represents the total value of fixed assets at the reporting date The data to be recorded in the "Original cost" items are the entire corresponding debit balances of the "Tangible fixed assets" and "Intangible fixed assets" accounts in the General Ledger or Subsidiary Ledger The accumulated depreciation (codes 223 and 229) represents the total depreciated value of fixed assets at the reporting date The data for this item is recorded as a negative value in parentheses ( ) The data to be recorded in the "Accumulated depreciation" items are the credit balances of the "Tangible fixed assets depreciation" and "Intangible fixed assets depreciation" accounts, respectively, in the detailed records - In the notes to the financial statements, the "Changes in fixed assets" item should be presented, including detailed information on the original cost, remaining value, accumulated depreciation at the beginning of the period, the amount of decrease during the period, and the ending balance - The organization and presentation of the financial statement items must comply with the standards and regulations set by the gov (VAS 03 & VAS 04) Furthermore, depending on the requirements of the company's management, the accounting department may need to design and develop detailed reports and management reports on the increase, decrease, transfer, and depreciation of tangible 35 This is a preview Do fixed you assets want full access? Go Premium and unlock all 47 pages 1.4 Comparison in accounting fixed assets according to VAS and IFRS Access to all documents 1.4.1 AIS 16 vs VAS 03 about tangible fixed asset 1.4.1.1 Terms of recognition Get Unlimited Downloads Similarities: Both IAS 16 and VAS recognize Property, Plant, and Equipment (PPE) as tangible assets when they meet both of the following conditions: Improve your grades - Generating future economic benefits from the use of the asset and the cost of the asset can be reliably measured - The useful life of the asset is more than year from the date of acquisition Differences: In addition to the above conditions, VAS 03 adds another condition: the Upload cost of the asset must be valued at VND 30 million or more according to Circular Share your documents to unlock 45/2013/TT-BTC 1.4.1.2 Determination of initial value of fixed assets Similarities: Both IAS 16 and VAS 03 require Property, Plant, and Equipment (PPE) to be initially recognized at cost Free Trial Differences: VAS 03 does not include the measurement and recognition of costs Get 30 days of free Premium related to dismantling, removing, disposing, and restoring the site where the asset is installed On the other hand, IAS 16 specifically regulates this, and the obligation for site restoration will be estimated and included in the cost of the asset at the time of recognition, with a corresponding provision for the future obligation 1.4.1.3 Reassessment of value after initial recognition Differences: - According to VAS 03, after initial recognition, tangible assets are determined based on the historical cost model: cost, accumulated depreciation, and carrying value VAS 03 only allows revaluation of fixed assets, and does not have provisions for recognizing impairment loss - For IAS 16, companies can choose to apply either the historical cost model or the revaluation model based on fair value 1.4.1.4 Depreciation The depreciation methods under IAS 16 and VAS 03 are quite similar However, IAS 16 provides more explicit guidance on allowing businesses to choose to separately identify significant components of a major asset into individual asset items and depreciate them over different useful lives If the revaluation model is chosen, after the revaluation date, the asset will be 36 This is a preview the revalued over itsand remaining usefulall life.47 pages Do depreciated you wantbased full on access? Goamount Premium unlock 1.4.2 AIS 38 vs VAS 04 about intangible fixed asset Access to all documents 1.4.2.1 Terms of recognition Similarities: recognition criteria for intangible fixed assets: Get Unlimited Downloads - Assurance of future economic benefits derived from the asset - Reliable determination of the asset's historical cost Improve your grades Differences: Additional requirements specified in VAS 04: - Estimated useful life of more than year - Meeting the minimum value criteria as prescribed by current regulations, which is equal to or exceeding 30,000,000 VND Upload 1.4.2.2 Determination of initial value fixed assetsto unlock Share yourofdocuments Similarities: Both IAS 38 and VAS 04 determine the initial value of assets based on the principle of historical cost Differences:The differences between IAS 38 and VAS 04 regarding intangible fixed assets evaluated in specific cases are as follows: Case Free Trial IAS30 38days of free Premium Get The cost of a separately acquired The cost intangible asset is determined as intangible Acquisition of separate intangible fixed assets VAS 04 of the separate fixed asset is follows: determined as follows: - The purchase price includes Purchase price (minus any trade import taxes and non-refundable discounts or rebates), taxes taxes, minus any trade discounts (excluding refundable taxes), and or rebates direct costs related to putting the - Direct costs related to putting asset into use as estimated the asset into use as estimated Acquisition Reference to market value: According to VAS 04, "Fair of intangible - The appropriate market value is value" can be: fixed assets through usually the purchase price at the - Quoted market price in an current date If there is no active market business purchase price, reference can be - Price of similar transactions for combination made to the most recent similar buying or selling intangible fixed transactions, as long as there assets have been no significant changes in the economic nature between 37 This is a preview Do you want full Go and Premium the access? transaction date the date and unlock all 47 pages of estimating the asset's fair value Access to all documents - If there is no market for the intangible fixed asset, estimation Get Unlimited Downloads of its fair value is based on reasonable Improve valuation techniques your grades During the development phase, More detailed the conditions for becoming an - Technical feasibility ensuring intangible fixed asset are as the completion and intended use follows: or sale of the intangible asset as Upload your documents to unlock - Technical Share feasibility ensuring estimated the completion and intended use - The entity intends to complete or sale of the intangible asset as the intangible asset for use or estimated sale - The entity has the intention to - The entity has the ability to use Free Trial Creation of finalize the intangible asset for or sell the intangible asset Get 30 days of free Premium use or sale - The intangible asset is expected intangible fixed assets internally - The organization possesses the to generate future economic capability to utilize or sell the benefits intangible asset - The organization has adequate within the enterprise - The intangible asset is technical, financial, and other expected to generate future resources to complete the economic benefits development, sale, or use of the intangible asset - The ability to reliably determine the entire cost during the development phase to create the intangible asset - Estimation with sufficient criteria for the useful life and value as prescribed for intangible fixed assets 1.4.2.3 Determination of the cost of intangible fixed assets IAS 38 and VAS 04 are similar in this regard 38 This is a preview Reassessment of value after initial recognition Do 1.4.2.4 you want full access? Go Premium and unlock all 47 pages Similarities: Cost-based method: After initial recognition, intangible fixed assets are determined based on cost, accumulated depreciation, and carrying value Access to all documents Differences: IAS 38 allows for an additional method of assessment, which is the replacement or revaluation method Under this method, intangible fixed assets are Get Unlimited Downloads tracked at the revalued amount, which is the market value minus accumulated depreciation and accumulated impairment loss Improve your grades 1.4.2.5 Recoverability of carrying value VAS 04 does not address this aspect According to IAS 38, entities should estimate the recoverable amount of intangible Upload fixed assets at least at the end of each financial year, even if there are no indications Share your documents to unlock of impairment: - Intangible fixed assets that are not yet in a ready-for-use state - Intangible fixed assets that have been depreciated for more than 20 years from the date of being ready for use Free Trial Get 30 days of free Premium 39 This is a preview CHAPTER 2: EVALUATIONS AND RECOMMENDATIONS Do you want full access? Go Premium and unlock all 47 pages 2.1 Evaluations of accounting treatment for fixed assets in Vietnam 2.1.1 Advantages Access to all documents The accounting treatment for fixed assets in Vietnam offers several advantages for businesses Get Unlimited Downloads Regulatory Compliance: Following the Vietnamese Accounting Standards (VAS) ensures compliance with Improve local accounting regulations, promoting transparency and your grades credibility in financial reporting It helps businesses meet legal requirements and facilitates communication with stakeholders, including investors, lenders, and regulatory authorities Upload Clear Framework: VAS provides a structured framework for recording, measuring, and presenting fixed assets Share in financial statements This clarity enhances consistency your documents to unlock and comparability of financial information among different entities, making it easier for users to assess the financial position and performance of businesses Historical Cost Basis: VAS generally adopts the historical cost basis for valuing fixed assets This approach provides a reliable and objective measure of the initial investment in assets, ensuring consistency in accounting treatment and reducing the Free Trial Get 30 of free Premium influence of market fluctuations on days reported values Depreciation Recognition: VAS provides guidance on the systematic allocation of depreciation expenses over the estimated useful life of fixed assets This helps businesses recognize the consumption of asset value over time, reflecting the economic benefits derived from their use in generating revenue Asset Management and Control: Implementing proper accounting procedures for fixed assets enables businesses to effectively track, monitor, and control their assets This includes maintaining detailed records of asset acquisitions, disposals, and transfers, as well as periodic physical verification to ensure the accuracy and existence of assets Decision-Making Support: Accurate and reliable fixed asset accounting information facilitates informed decision-making by management It helps in assessing the profitability and return on investment of different assets, identifying underperforming assets, evaluating replacement or upgrade options, and formulating effective asset management strategies Loan and Investment Evaluation: Financial institutions and potential investors often require detailed information on a company's fixed assets as part of their evaluation process Proper accounting treatment provides transparency and credibility in asset valuation, enhancing the chances of securing loans and attracting investment Tax Planning and Compliance: Proper fixed asset accounting enables businesses to 40 This is a preview tax depreciation expenses, can all have Do accurately you wantdetermine full access? Go Premium andwhich unlock 47 significant pages implications for tax planning and compliance Compliance with tax regulations is essential to avoid penalties and ensure a smooth relationship with tax authorities Access to all documents Risk Mitigation: By adhering to accounting standards and maintaining accurate fixed asset records, businesses reduce the risk of misstatements, errors, and fraud in Get Unlimited Downloads financial reporting Effective internal controls associated with fixed asset accounting help safeguard assets and minimize the potential for misappropriation or misuse Improve your grades It is important for businesses to leverage these advantages by establishing robust internal controls, ensuring proper documentation and record-keeping, and investing in qualified accounting personnel and systems By doing so, businesses can Upload effectively manage their fixed assets and derive maximum value from their investments Share your documents to unlock 2.1.2 Disadvantages While the accounting treatment for fixed assets in Vietnam offers several advantages, there are also some potential disadvantages that businesses may encounter There are Free Trial a few notable disadvantages: Complex and Evolving Regulations: TheofVietnamese Accounting Standards (VAS) Get 30 days free Premium governing fixed asset accounting can be complex and subject to frequent updates and revisions Staying abreast of these changes and ensuring compliance can be challenging for businesses, particularly smaller enterprises with limited resources Lack of Consistency: Despite efforts to standardize accounting practices through VAS, there may still be inconsistencies in the application and interpretation of the standards across different businesses and industries This lack of consistency can make it difficult to compare financial statements and assess the financial health and performance of different entities Limited Flexibility in Valuation: VAS generally prescribes the historical cost model for valuing fixed assets, with limited provisions for alternative valuation methods such as fair value This limitation may not accurately reflect the current market value of certain assets, especially when there are significant fluctuations in market conditions or changes in asset values over time Challenges in Depreciation Estimation: Estimating the useful life and residual value of fixed assets can be challenging, particularly for assets with unique characteristics or those subject to rapid technological advancements Determining appropriate depreciation methods and rates can be subjective, potentially leading to variations in depreciation expenses and affecting the comparability of financial statements Impairment Recognition: The process of assessing impairment of fixed assets can be 41 This is a preview and full require professional judgment The Do complex you want access? Go Premium and identification unlock all of 47impairment pages indicators, determining the extent of impairment, and recognizing impairment losses involve inherent uncertainties and subjectivity, potentially leading to variations in Access to all documents impairment assessments among different businesses Limited Guidance on Intangible Assets: While VAS provides some guidance on the Get Unlimited Downloads accounting treatment of intangible assets, such as computer software and trademarks, there may be limitations or gaps in specific guidance for certain types of intangible Improve your grades assets This can create challenges in determining the appropriate recognition, measurement, and amortization of intangible assets Cost and Resource Constraints: Implementing and maintaining a robust fixed asset Upload accounting system requires investment in financial software, skilled personnel, and ongoing training Smaller businesses with limited financial resources may find it Share your documents to unlock challenging to allocate the necessary funds and expertise to effectively manage fixed asset accounting processes Lack of Integration with International Standards: VAS, although influenced by international accounting standards, is not fully aligned with International Financial Reporting Standards (IFRS) This misalignment can create challenges for businesses Free Trial with global operations orGet aspirations, asfree theyPremium may need to reconcile financial 30 days of statements prepared under VAS with international reporting standards 2.2 Recommendation for accounting procedure for fixed assets in business in Vietnam 2.2.1 Recommendations for state management agencies Based on the potential disadvantages of accounting treatment for fixed assets in Vietnam, there are some recommendations for state management agencies: Review and Update Accounting Standards: Regularly review and update the Vietnamese Accounting Standards (VAS) to align with international best practices, such as International Financial Reporting Standards (IFRS) This will help enhance transparency, comparability, and relevance of financial information for businesses operating in Vietnam Provide Guidance and Training: State management agencies should offer guidance and training programs to businesses on the proper implementation of fixed asset accounting standards This will help improve understanding and compliance with accounting regulations, reducing errors and inconsistencies in financial reporting Enhance Enforcement and Monitoring: Strengthen the enforcement of accounting regulations, including fixed asset accounting standards, by conducting regular audits and inspections This will ensure that businesses adhere to the prescribed accounting 42 This is a preview andfull maintain accurate of their and fixed assets Do procedures you want access? Gorecords Premium unlock all 47 pages Simplify Reporting Procedures: Streamline reporting procedures and reduce administrative burdens for businesses by simplifying the requirements for fixed asset Access to all documents reporting State management agencies should strive to strike a balance between ensuring accurate financial information and minimizing the reporting burden on Get Unlimited Downloads businesses Promote Technology Adoption: Encourage the use of accounting software and Improve your grades technology solutions that can facilitate accurate and efficient fixed asset management State management agencies can provide incentives or subsidies to businesses to adopt such technologies and promote their widespread use Upload Develop Comprehensive Guidance on Asset Valuation: Provide comprehensive guidelines on asset valuation methods, including the determination of useful lives Share your documents to unlock and residual values This will help businesses make informed decisions regarding the valuation and depreciation of their fixed assets, ensuring consistency and accuracy in financial reporting Collaboration with Professional Accounting Bodies: Collaborate with professional accounting bodies and associations to promote best practices in fixed asset Free Trial accounting This can involve training sessions, seminars, and workshops Getorganizing 30 days of free Premium to disseminate knowledge and updates on accounting standards and practices Monitor International Developments: Stay abreast of international developments in accounting practices, particularly in relation to fixed asset accounting, and consider adopting relevant updates and amendments to local standards This will help ensure that accounting regulations in Vietnam remain up-to-date and in line with global standards Continuous Evaluation and Improvement: Continuously evaluate the effectiveness of fixed asset accounting regulations and their impact on businesses Collect feedback from stakeholders, including businesses, auditors, and investors, to identify areas for improvement and make necessary adjustments to enhance the accounting framework By implementing these recommendations, state management agencies can contribute to the development of a robust and efficient fixed asset accounting system in Vietnam, promoting transparency, reliability, and accountability in financial reporting 2.2.2 Recommendations for businesses There are some recommendations for businesses regarding the accounting treatment of fixed assets in Vietnam: Compliance with Accounting Standards: Ensure strict compliance with the 43 This is a preview Standards (VAS) and related regulations fixed Do Vietnamese you wantAccounting full access? Go Premium and unlock allregarding 47 pages asset accounting Develop internal policies and procedures that align with these standards to maintain accurate and reliable financial records Access to all documents Adequate Documentation: Maintain detailed documentation for all fixed assets, including acquisition records, valuation methods, useful lives, and depreciation Get Unlimited Downloads calculations This documentation will provide support for the accuracy and appropriateness of fixed asset accounting treatments during audits or inspections Improve your grades Regular Asset Inventory: Conduct regular physical asset inventories to verify the existence, condition, and location of fixed assets This helps prevent asset misappropriation, identify any discrepancies, and maintain an up-to-date register of Upload fixed assets Accurate Asset Valuation: Ensure the valuation of fixed assets is carried out using Share your documents to unlock appropriate methods and assumptions Seek professional expertise if needed to determine the fair value, useful life, and residual value of assets Regularly review and update asset valuations as necessary Robust Depreciation Methodology: Implement a consistent and appropriate depreciation methodology for fixed assets Choose a depreciation method that Free Trial reflects the pattern of asset Get consumption andfree is compliant 30 days of Premium with accounting standards Regularly review the depreciation rates and useful lives of assets to ensure they are still relevant and reflective of their economic usage Proper Classification and Disclosure: Classify fixed assets correctly based on their nature, such as tangible or intangible assets Ensure accurate disclosure of fixed assets in financial statements, including details on acquisition costs, depreciation expenses, accumulated depreciation, and impairment losses Adopt Technology Solutions: Explore the use of accounting software or enterprise resource planning (ERP) systems to streamline fixed asset accounting processes These solutions can help automate calculations, track asset movements, and generate accurate reports, reducing the risk of errors and enhancing efficiency Staff Training and Development: Provide adequate training and development opportunities to accounting staff responsible for fixed asset accounting Keep them informed about changes in accounting standards and regulations, ensuring their understanding of proper fixed asset accounting procedures Regular Internal Controls and Audits: Implement robust internal controls and conduct regular internal audits to monitor the accuracy and reliability of fixed asset accounting processes This helps identify and rectify any discrepancies or weaknesses in the system and ensures compliance with accounting policies Stay Informed: Stay updated on changes in accounting standards and regulations, 44 This is a preview to fixed accounting Monitor updates regulatory Do particularly you wantthose fullrelated access? Goasset Premium and unlock allfrom 47 pages bodies and seek professional advice if necessary to ensure compliance with the latest requirements Access to all documents By following these recommendations, businesses can improve their fixed asset accounting practices, enhance financial transparency, and ensure compliance with Get Unlimited Downloads regulatory requirements Accurate and reliable fixed asset accounting will provide a solid foundation for decision-making, financial analysis, and stakeholder confidence Improve your grades Upload Share your documents to unlock Free Trial Get 30 days of free Premium 45 This is a preview Do you want full access? GoCONCLUSION Premium and unlock all 47 pages In conclusion, the accounting treatment of fixed assets in Vietnam presents both advantages and disadvantages While it provides a systematic approach to record and Access to all documents manage fixed assets, there are challenges such as complex regulations, potential for subjective judgments, and limitations in reflecting the true economic value of assets Get Unlimited Downloads To address these disadvantages, state management agencies should consider simplifying regulations, providing clearer guidelines, and promoting transparency in Improve your grades financial reporting Businesses, on the other hand, can implement proper internal controls, adopt technology solutions, and ensure compliance with accounting standards to mitigate the disadvantages and maximize the benefits of fixed asset Upload accounting By following these recommendations, businesses can improve the accuracy, Share your documents to unlock reliability, and transparency of their fixed asset accounting processes, leading to better decision-making, enhanced financial analysis, and increased confidence from stakeholders Ultimately, effective accounting treatment for fixed assets contributes to the overall financial health and success of businesses in Vietnam Free Trial Get 30 days of free Premium 46 This is a preview Do you want full access? Go Premium and unlock all 47 pages REFERENCES Võ Thị Kim Anh (2013) "Access “Kế tốn cố định Cơng ty TNHH MTV Mơi totài allsản documents trường Đô thị Đà NẵngMaster's Thesis, University of Da Nang Đoàn Thị Vân Anh (2016)Get " Kế tốn tài sản cố định cơng ty TNHH Một thành Unlimited Downloads viên dịch vụ nhà khu đô thị” Master's Thesis, University of Commerce, Hanoi Ministry of Finance (2015), Enterprise Accounting Improve your grades Regime - Volume 1, Volume 2, Finance Publishing House, Hanoi Ministry of Finance (2006), Vietnamese Accounting Standards System, Finance Publishing House, Hanoi Ministry of Finance (2014), Circular 200/2014/TT-BTC dated December 22, 2014, Upload on the issuance of Enterprise Accounting Regime Share your documents to unlock Ministry of Finance (2017), Circular 28/2017/TT-BTC on the issuance of the Regime for Management, Use, and Depreciation of Fixed Assets Ministry of Finance (2013), Circular 45/2013/TT-BTC dated April 25, 2013, on depreciation of fixed assets Free Trial Ha Dong Urban Environment Joint Stock Company (2017, 2018, 2019), Annual Financial Reports, Hanoi Get 30 days of free Premium Ha Dong Urban Environment Joint Stock Company (2017, 2018, 2019), Supporting documents, detailed records of fixed asset changes, Hanoi 10 Đinh Thị Mai (2010), Giáo trình kế tốn tài doanh nghiệp , Finance Publishing House, Hanoi 11 Nguyễn Thị Phương Dung (2014), “Kế toán tài sản cố định doanh nghiệp kinh doanh xăng dầu thành phố Hải Phòng” Master's Thesis, Hai Phong University 12 Phạm Thị Mỹ Phương (2007), "Hồn thiện tổ chức cơng tác kế tốn Cơng ty Dịch vụ Mơi trường Biên Hịa" Master's Thesis, Lac Hong University, Dong Nai 13 National Assembly (2015), Accounting Law 14 Vũ Thị Hải Yến (2017), " Kế toán tài sản cố định Ngân hàng thương mại cổ phần Việt Nam thịnh vượng" Master's Thesis in Economics, Trade Union University, Hanoi 15 International Accounting Standards Board (2004) IAS 38: Intangible Assets London: International Financial Reporting Standards Foundation 16 International Accounting Standards Board (2013) IAS 16: Property, Plant and Equipment London: International Financial Reporting Standards Foundation 47