THÔNG TIN TÀI LIỆU
MINISTRY OF EDUCATION AND TRAINING MINISTRY OF FINANCE ACADEMY OF FINANCE PHAM THU HUYEN FIXED ASSET ACCOUNTING IN MINERAL MINING COMPANIES IN THE NORTHERN AREA MAJOR: ACCOUNTING CODE: 9.34.03.01 SUMMARY OF ECONOMIC DOCTORAL THESIS HA NOI – 2020 THE THESIS WAS COMPLETED AT THE ACADEMY OF FINANCE SCIENTIFIC SUPERVISORS: Assoc.Prof.Dr NGUYEN THI DONG Dr TRAN HAI LONG Examiner 1:…………………………………… Examiner 2: …………………………………… Examiner 3: …………………………………… The thesis is presented at the Thesis Council at academy level at the Academy of Finance At:….hour…… day……month……year……………… The thesis is available at the National Library of Vietnam and the library of the Academy of Finance INTRODUCTION Urgency of the thesis topic In the context of deepening international economic integration, the Communist Party and the government’s policy to prioritize the development of spearhead industries has enabled more and more mineral mining companies (mining companies, in short) to seize new business opportunities in line with the general development rules of the economy Fixed assets (FA) are considered an important resource of high proportion in companies The usage and management of FA directly affect product and service quality, price, competitiveness, market position and development of a company Moreover, mineral mining is a special physical production field so FA is indispensable to the operation and development of mining companies Therefore, it is vital to manage FA in mining companies effectively To so, fixed asset accounting in mining companies needs to be organized in a strict and appropriate manner in line with international standards, the government’s norms and accounting regime, capability and conditions of mining companies, and management requirements To meet management requirements and step by step strengthen operational efficiency in mining companies, management policies (as an economic management tool at the macro and micro levels) have been being improved This applies for accounting policies in general and fixed asset accounting policies in particular Management accounting of FA provides information which is vital and influences the investment for upgrade and usage of FA However, mining companies in the North have not paid proper attention to fixed asset accounting (FAC); information collected for creating investment plans is still unclear, inadequate and is based on estimation Also, after researching, the authors found out that there have been no comprehensive studies on fixed asset accounting in mining companies Due to these reasons, the author chose the following topic for the doctoral thesis: "Fixed asset accounting in mineral mining companies in the Northern area” Literature review The author studied local and international published researches on FA, and FAC regarding the contents of standards to identify FA; acquiring, measuring, recording, presenting and providing FAC information in both financial and economic aspects The author also studied the harmony between FAC in several companies and IAS / IFRS Based on that, the author found out that there have been no comprehensive studies about FAC in mining companies Therefore, the author has drawn some issues that need further research and development in the thesis as follows: Firstly, previous works about the current practice of FAC in companies only provided general studies and assessments in all types of companies or in trading companies No study provided an in-depth analysis of basic characteristics of FA in mining companies, especially how typical assets of the mineral mining industry affects FAC activities, especially typical ones, namely: mining rights, mineral exploration expenses and environmental recovery expenses of mining companies in the Northern area Secondly, published scientific researches in Vietnam and the world only studies each content of FAC, mainly from the perspective of financial accounting; there have been no comprehensive studies on FAC from the perspective of management accounting Therefore, the author has continued to study and develop FAC from both aspects to improve the efficiency of using FA in mining companies in the Northern area Based on the viewpoint of organizing accounting information, the author has provided an in-depth study of FAC in companies according to the processes of accounting information which include: receiving, processing, and providing accounting information The author has applied that into practice to carry out survey and study the current situation of FAC in mining companies in the Northern area according to each identified concert in accounting processes In addition, the author has proposed solutions to improve FAC in line with the current situation of mining companies in the Northern area; this helps enhance the quality of accounting information and usage and management efficiency of FA in these companies The thesis clarifies conditions for companies to implement solutions Thirdly, previous researches mentioned theoretical and practical issues about FAC in companies However, FAC depends a lot on policies and approach methods of each country in each specific period; therefore it is necessary to keep studying the theoretical framework of FAC and the regulations of FAC in mining companies in Vietnam’s legal system In assessing the application of IAS/IFRS in FAC in some countries in the world, the author has drawn experience lessons for Vietnam and recommended amendment and supplement to the legal corridor for FAC in mining companies to meet the actual demand of Vietnam in the context of integration and Industry 4.0 Research objectives and tasks of the thesis The overall objective of the thesis is to study the theoretical basis and current practice of FAC in companies to improve FAC in the new conditions from the perspective of flexible application and compliance in each industry, including the mineral mining industry With such overall objective, the thesis has identified the following specific tasks: - Inherit and further clarify theoretical issues about FA and FAC according to processes in companies, including: receiving, systemizing and processing, as well as providing FAC information Look into trends and experience in applying IAS/IFRS in FAC of several countries that are similar to Vietnam in order to draw experience lessons for FAC in Vietnamese mining companies in general and those in the Northern area in particular - Carry out survey and analysis of the current situation of FAC in mining companies in the Northern area to confirm obtained results and shortcomings of FAC in these companies as well as to point out reasons for such shortcomings - Propose solutions to improve FAC based on the current situation of FAC in mining companies in the Northern area and present conditions to implement such solutions Research question: (1) What is the theoretical basis about FA and FAC from aspects of financial accounting and management accounting? (2) What is the current trend of applying IAS/IFRS in FAC in countries nowadays? (3) Regarding the current situation of FAC in mining companies in the Northern area, does it conform to legal regulations and meet information requirement of interested parties? (4) What is the current situation of legal requirements about FAC in Vietnam and the demand of applying IFRS in FAC in Vietnamese mining companies? (5) What are required solutions to improve FAC in mining companies in the Northern area to meet the demand of business management and international integration in the future? Thesis subject and scope of research Thesis subject: The thesis has studied FAC in companies in general and in mining companies in the Northern area in particular from both financial accounting and management accounting aspects Research scope: - In term of space: The thesis has not studied foreign mining companies that are operating in the North of Vietnam Companies in the research sample have independent accounting systems and have to present FA information in separate financial statements The thesis has not studied information presented in the consolidated financial statement - In terms of time: The thesis has studied the development history of the mineral mining industry with vision until 2030 Solutions given in the thesis are in line with the industry’s development orientation with vision until 2030 Surveyed data in companies in the research samples are for 2015, 2016, 2017, and 2018 - In terms of time: The thesis has studied theory and practice of FAC from both financial accounting and management accounting aspects according to the processes of accounting information which include receiving, processing, and providing FA information Such information is held by mining companies can they can use information for their business and production purposes The thesis does not study FA used for purposes other than business and production such as for welfare, infrequent lease…, they are not typical in mining companies The thesis has focused on studying contents of accounting of tangible and intangible fixed assets formed by ownership capital or loaned capital (excluding loans in the form of financial lease) Research methodologies The general method is qualitative research, including: Document research, analysis, descriptive statistics, surveys through questionnaires, synthesis, comparison, induction, interpretation, combined with expert interviews to clarify the theory and practice in the thesis objective - To assess the current situation of FAC in mining companies in the Northern area, the author has collected data from two sources: primary data (survey results in 70 mining companies in the North) and secondary data (financial statements, notes of auditors …) Scientific and practical significance of the thesis - In terms of theory: The thesis has systemized the general theoretical basis of FAC in companies, generalized and analyzed local and international accounting standards related to FAC On the basis of studying experience in applying IAS/IFRS in FAC of some countries in the world, the thesis has drawn experience lessons for FAC in Vietnam In addition, the thesis has clarified accounting of several typical fixed assets in the mineral mining industry including: mining rights, mineral exploration expenses and environmental recovery expenses - In terms of practice: Through analyzing the current situation of FAC in mineral mining companies in the Northern area, the thesis has analyzed and pointed strong points, shortcomings, and overall reasons for such shortcomings Especially, the thesis has clarified specialized fixed assets in mineral mining companies including: mining rights, mineral exploration expenses and environmental recovery expenses From that, the thesis has pointed out orientations and proposed solutions to improve FAC in mineral mining companies in the Northern area; this helps to provide the information basis for FA’s effective Proposed solutions in the thesis including improving the identification of FAC, improving FAC in mineral mining companies in the Northern area from the aspects of both financial accounting and management accounting The thesis has also pointed out necessary conditions for implementing such solutions Structure of the thesis In addition to introduction, conclusion, index, appendix and list of reference material, the main content of the thesis is presented in chapters: Chapter 1: Basic theoretical issues about fixed asset accounting in companies Chapter 2: The current situation of fixed asset accounting in mineral mining companies in the Northern area Chapter 3: Solutions to improve fixed asset accounting in in mineral mining companies in the Northern area CHAPTER BASIC THEORETICAL ISSUES ABOUT FIXED ASSET ACCOUNTING IN COMPANIES 1.1 Fixed asset and demand of fixed asset information 1.1.1 Fied asset identification in companies Up to now, there have been many different viewpoints about criteria to identify fixed assets In the author’s opinion: Fixed assets are assets to which a company’s accounting unit has the right to control; they are of great value, reliably determined, used for a long time and they certainly will bring about future economic benefits for this company 1.1.2 Characteristics of fixed assets that affect fixed asset accounting Firstly, FA are assets of great value; they belong to companies and are under the company’s right of management and usage; therefore companies need to closely manage FA in terms of quality and quantity At the same time, companies need to choose suitable investment methods of FA in line with their requirements and characteristics of business and production as well as their financial capability Secondly, FA are invested to be used in many periods of business and production or for many years of operations; therefore, companies need to pay attention to regular protection, maintenance, and repair of FA to maintain their readiness to use Thirdly, FA are depreciated when it is used in business activities or not; therefore their value decrease in terms of value Companies need to choose suitable depreciation methods of FA to assess the actual depreciation level of FA so that they can timely recover the value they invested in FA and improve management and operational efficiency Fourthly, FA play an important part in reflecting a company’s financial situation and considerably affect information presented in the balance sheet and income statement As a result, companies need to manage and implement FAC effectively and appropriately, reflect information of FA in financial statements according to regulations, and provide correct information to related parties in a timely manner Fifthly, currently many companies purchase FA of great value but they not bring their value into full play Accounting for asset impairment in FAC needs to be performed according to conservatism and full disclosure principles to avoid situations where the real asset value of companies are inflated 1.1.3 Classification if FA in companies There are many different FA in companies in terms of specifications, types, technical characteristics, usage and asset management requirements Therefore, to facilitate management and accounting, companiess need to conduct FA classification according to certain criteria in order to identify the subjects for recognition and management of FA Currently, the structure of FA is mainly classified according to types, usage objectives and status as well as the source of FA formation 1.1.4 Demand of FAC information For business executives: FAC information assists the planning and decision making processes Implementing, inspecting, and evaluating FA usage efficiency contributes to the improvement of business management For external entities: FAC information does not only assist company management activities but they are also helpful for other entities such as investors, banks, credit institution, and state management agencies in making appropriate decisions 1.2 FAC in companies from the angle of financial accounting 1.2.1 Receiving FA financial information FAC input is made by various units in companies mostly through means of vouchers, related accounting documents and other equipment Accounting vouchers and related documents may be made in different places and forms (manual documents, electronic documents), with different procedures depending on the nature of each transaction, transaction or regulation of each enterprise They are obtained by is obtained by certain methods to classify and handle them according to their usage purposes Each company needs to base on their general requirements on accounting vouchers, business characteristics and specific management requirements as well as specific business situations that occur to build and apply the FAC voucher system accordingly to ensure timely and accurate input information for users in the next stages of financial accounting 1.2.2 Processing FA financial information 1.2.2.1 Measuring value and related expenses in the usage cycle FA evaluation in companies must comply with accounting principles and assumptions such as historical cost principle, continuity assumption and matching principle There have been many different points of view of price calculation in the history of accounting development and accounting theory, which are divided into two basic viewpoints of price calculation: historical cost and revaluation price However, the application of a cost accounting perspective in each country depends on the country's economic and social development Calculating FA value according to the cost model Identifying the initial value of FA At the time of identifying initial cost, FA were record at the historical cost which includes all expenses that directly involved at first to form FA In addition to guiding the measurement and recognition of normal FA in business and production activities, IASB also issued accounting standards to guide the measurement and and recognition of typical FA in mining companies as follows: Firstly, about mineral exploration expenses: Accounting International Financial Reporting Standards 06 about “Exploration for and Evaluation of Mineral Resources” (IFRS 06), mining exploration expenses are recognized as intangible FA Accordingly, such assets are measured and recognized at first according to its historical cost including all expenses that companies pay or exploratory drilling on the condition that exploratory drilling activities result in the finding of mineral reserves Secondly, about mining rights: also according to IFRS 06, expenses for purchasing mining rights are recognized as intangible FA At the time of initial recognition, such FA are recognized according to historical cost including all expenses companies need to spend to acquire mining rights and expenses for procedures of applying for exploitation licenses, and expenses for granting mining rights Thirdly, about environmental recovery expenses: According to the international accounting standard No 37 on “Provisions, contingent liabilities and contingent assets” (IAS 37), environmental recovery expenses are mandatory for companies at a a specified time in the future with a certain value, associated with the mining project Also, according to ISA 16, companies have to make initial estimates of expenses for impairment, premises turnover, status quo restoration and responsibilities they need to bear (recovery expenses) when purchasing assets or using assets in a certain period So recovery expenses are componential expenses to form tangible FA Expenses incurred after initial recognition In the process of using FA, companies to spend to maintain the ability to bring future economic benefits of assets such as the expenses of repairing assets recorded in operating expenses in the period If the costs incurred after the initial recognition which extends the life of the FA or increase the future economic benefits of companies from the use of the FA, these expenses will be capitalized into the historical cost of FA and gradually allocated to business expenses through FA depreciation According to IFRS 6, when technical and commercial viability of a resource is determined, the expenses associated with the development of that resource are not recognized as assets for exploration and valuation Expenses for the development and exploitation of resources are outside the scope of IFRS 6, IAS 16 and IAS 38 so companies need to determine accounting policies to manage those expenses When assessing technical feasibility and commercial viability, it is necessary to check the existence and reserves of resources to carry out development activities IASB noted that the development of exploration and valuation of a resource included the accounting development stages of the internal project According to IAS 38, in the development phase of an internal project, a company can identify expenses as intangible FA and prove that they generate future economic benefits FA depreciation and determination of FA depreciation value Currently, there are basic methods of determining the basic depreciation value: Straight line, unit of production depreciation method and accelerated depreciation method In addition, depending on the regulations of each country, companies can use some other methods such as liquidation method, alternative method The determination of depreciation method and estimating useful life of FA is a matter of subjective judgment Therefore, the presentation of the applicable depreciation methods and the estimated useful life of FA allows users of financial statements to consider the accuracy of accounting policies set by company executives as a basis to compare with other companies Particularly for intangible assets of exploration and evaluation that have usage time, according to IFRS 6, the the reducing balance method is the most appropriate Determination of FA impairment value In IAS 36 regarding “impairment of assets”, it is required that if the assets show signs of decline in value at the time of preparation of the financial statements and the company intends to continue using that FA in its business activities, it is necessary to determine the impairment value (loss value) of FA in order to perform accounting for asset impairment Unlike IAS 36, when referring to the loss of assets in exploration and valuation, IFRS assumes that this property will be assessed for impairment when: (1) The exploration right of a company in a defined area expire or expire in the near future; there is also no hope of resuming exploration rights; (2) The main expenses of resource exploration and pricing in a particular area are not included in the budget or cost estimate; (3) The exploration and valuation of resources in a given area does not detect the profitability of the resource and the company decides to suspend operations in that area; (4) Although development in a given area is feasible, there is sufficient data to indicate that the book value of the asset will not be fully recoverable during the successful development or sale phase Ina ddition, IFRS applies a special cash-generating unit (CGU) to for exploration and valuation assets Determination of the residual value of FA after each accounting period The residual value of FA is the value of FA that is invested and not yet allocated to expenses; it reflects the value of FA in the total value of assets and partly helps assess business and production capacity of companies and also help companies assess their capacity According to the original cost model, the residual value is the difference between the original cost and the depreciation value of FA FA value after stop being recognized When FA are liquidated or are no longer able to bring about future economic benefits from using FA, companies need to stop recognizing them FA (IAS 16) In case the FA no longer bring economic benefits in the future and companies have no long-term need of such assets, according to requirements of IFRS 05, companies must must separate these FA and present them in an category (long-term assets available for sale) The principle of recognizing the value of available-for-sale long-term assets is the lower of the two fair values less cost of sale and carrying value Assets that have been classified as holding assets for sale are not depreciated Measurement of FA value according to the re-evaluation model According to re-evaluation, after initial recognition, FA are re-evaluated based on the general price level, the current price, the output price or fair value Measuring and recognizing FA according to the general price level : Accountants measure and initially recognize FA according to the general price level based on historical price system At the time of preparing the financial statements, all items of the Balance Sheet including FA are accounted for using an adjusted price index that is the consumer price index or deflator price index difference in the value of net assets at the end of the period is recorded as the profit of the company Presenting FA information according to the current price On the basis of current prices, the current FA price is determined each time financial statements are prepared Fluctuations of current price are recorded in operating profit as a separate factor presented in financial statements Presenting FA information according to the output price In the financial statement, FA are presented according to the output price The difference between the book value of FA at the end of the accounting year and the market value of the assets presented by the company is profit in the income statement In addition, companies must present the basis and method of determining the output price and other explanations Presenting FA information according to the fair price In addition to the information presented on the financial statements that are similar to the original prices, for FA recorded at fair value, its is required to presented: time of evaluation, auditors, methods and assumptions for determination of fair value, the extent to which fair value is determined by reference to market prices or other valuation techniques 1.3.FAC in companies from management accounting aspects 1.3.1 Collecting FA management accounting information In order to perform the administrative functions, in addition to using the past information like financial accounting, management accounting also receives additional forecasting information so companies can design appropriate detailed documents that fully reflect factors, content to serve the processing and preparation of management accounting report and meet the internal management requirements In addition, the received FA information is also shown in the documents that are the output information of other units Management accounting can use additional methods such as: observation, experimental methods, public opinion surveys, direct investigation methods, interviews The techniques used when receiving are: analysis, selection, synthesize and estimate to collect primary information or collect secondary information from books, newspapers, prepared reports 1.3.2 Processing FA management accounting The process of managing FA accounting management information is associated with the management needs according to the functions: planning and decision making on FA; organizing the implementation of FA decision; checking and evaluating the management and use of FA 1.3.3 Presenting and providing FA information in management reports The accounting management information about FA provided by the system is mainly reflected in management reports Depending on the requirements, management ability of executives at each level in each company or each internal unit of a company, the construction of the general management reporting system in general and management report on FA in particular may vary in terms of the number of forms, lists of indicators, and the structure of the report 1.4 Trends in applying IAS/IFRS to FAC in several countries in the world and experience lessons for Vietnam 1.4.1 Trends of applying IAS/IFRS in the world The trend of international integration has become stronger and stronger, leading to the harmonization and standardization of countries on international accounting This requires countries to pay attention to amending, supplementing and completing the framework system However, each country has different legal environment, political, cultural and social situations, so it has different methods of standardization 1.4.2 Application of IAS/IFRS in FAC in some countries In Vietnam due to the characteristics of political institutions, the current accounting system is inclined more towards accounting under the Civil Code like France and Germany so the author chose FAC of France to study experience for FAC in Vietnam in applying IAS / IFRS In addition, the author also chose to study more about FAC in China because it is a country with leading mining output in the world and has a transition economy which has many similarities with Vietnam 1.4.3 Experience lessons in applying IAS/ IFRS to FAC in Vietnamese companies + About the basis of applying FA in Vietnam: international accounting standards +About the application of international accounting practice: Vietnamese accounting needs to be constantly improved to comply with the general practice of international accounting but must also ensure that it is suitable to the country's development conditions, especially in the current conditions when the market economy is still limited + About terms in FAC standards: The terms used in Vietnamese accounting standards need to be accurate but simple, easy to understand and commonly used to create favorable conditions for learners and accountants to apply them in practice + About FA recognition criteria: Basically, countries have relatively similar regulations in the accounting standards of international accounting standards, so Vietnam needs to comply with the general provisions of the international accounting standards system but needs specifiy these standards according to Vietnam's conditions in each specific period + About FA evaluation: According to Vietnamese accounting standards VAS 03 and VAS 04, only the historical cost method is used to evaluate FA Normally, the value of assets after re-evaluation will be lower because of increasing social labor productivity or development of science and technology, more modern machines and equipment The old FA is outdated, so most FAs are difficult to retain their original values and need to be re-evaluated + About receiving, processing and presenting FAC information: accounting for impairment has not been mentioned in Vietnam so in a near future it needed to be added CONCLUSION OF CHAPTER Chapter has mentioned basic theoretical issues about FAC in companies in many aspects, such as: FA identification criteria; characteristics and structure of FA, the role of FAC information in management; contents of FA financial accounting and management accounting The foundation of FAA activities in many countries in the wold includes international accounting standards The thesis has also analyzed the trend of applying IAS/IFRS in FAC in the world and the current practice of IAS/IFRS in FAC of two countries with similarities to Vietnam (China, France) These are important theoretical bases to evaluate the current situation of applying accounting mechanism in mining companies in Vietnam; based on that the author has proposed solutions to improve FAC in companies to meet the requirements of global economic integration process Chapter THE CURRENT SITUATION OF FIXED ASSER ACCOUNTING IN MINERAL MINING COMPANIES IN THE NORTHERN AREA 2.1 Overview of mining companies in the Northern area 2.1.1 Mineral resources in the Northern area The North of Vietnam is the area with a long history of geological development; the continuous weathering processes have created favorable conditions for the formation of many types of minerals 2.1.2 Characterics of management organization and mining activities of mining companies in the Northern area 2.1.2.1 History of establishment and development of mining companies in the Northern area The mining industry in Vietnam was formed in the late 19th century by the French So far, with abundant and diverse mineral potentials, many companies have been established in the North, bringing about high economic efficiency and contributing to the country's economic development 2.1.2.2 Characteristics of management organization in mining companies in the Northern area About ownership type Of 70 mining companies in the survey 45 companies receive state investment and 25 companies not About organizational structure and management model 62/70 companies are organized according to the three-level model (company - enterprise / team - unit / workshop), 8/70 companies have two-level management model; they are joint stock companies with production team and production units Survey results show that whatever the management model is, the Board of Directors of the company will run the business activities of the company 2.1.2.3 Characteristics of FAC activities in mining companies in the Northern area Accounting policies in use Currently, mining companies in the Northern area are complying with Circular No 200/2014 / TT-BTC issued on December 22, 2014 on “Guidelines for accounting policies for enterprises” and Circular No 53/2006 / TT- BTC dated 12/6/2006 on "guiding the application of enterprise administration" The application of accounting policies according to these regulation has helped provide a clear and standard lega; corridor for mining companies in the Northern area and contributed to the transparency of provided accounting information Application of information and technologies in accounting 64/70 mining companies in the Northern area in the survey has used information and technologies through accounting softwares; 6/70 has used excel for recording FAC employee assignment In 65/70 companies, there is no distinction between FAC and general accountants 5/70 have specialized personnel of FAC activities 2.1.2.4 Characteristics of mining activities that affect FAC in mining companies in the Northern area Firstly, main mining activities include such activities as geological exploration, investment in building mines, mining, transportation, screening, mineral enrichment for refined products used in other economic sectors Therefore, mining companies need to invest big capital for FA to continuously innovate advanced and modern technologies Therefore, businesses need to have appropriate investment and depreciation plans Secondly, the nature of mining products is that they are located at the production plac When the mining activities are completed, the raw products must be transported to factories for sorting and refining Therefore, in addition to investing in specialized FA for exploitation, ecompanies must also invest in other necessary FA such as transportation vehicles, temporary houses for workers in the exploitation areas This greatly affects the FA structure of mining enterprises Thirdly, mineral mines scatteres everywhere and separate from the accounting unit of the company in charge This nature requires accountants to record, monitor, manage the use and allocation of FA depreciation reasonably for the users, especially the inventory of FA Fourthly, during the mining process, the machinery and equipment that must be moved regularly so there are specialized machine and equipment only used for each field As a result, these FA can be easily damaged and the risk of decrease in FA value is very high Mining enterprises need to pay attention to the repair of FA, and at the same time, they will have to consider to record impairment of assets for specialized mining machinery and equipment Fifthly, mining is a specialized industry, so mining companies in the Northern area have distinctive assets such as mining rights, exploration expenses, environmental recovery expenses The accounting of these specific FAs also needs to be different from the accounting of other common FA used for business and production 2.2 Overview of FA in mining companies in the Northern area 2.2.1 Identifying FA in mining companies in the Northern area To be recognized as FA, assets of companies must satisfy criteria However, the understanding and application of two criteria, namely “the historical price is reasonably determined” and “future economic benefit from using such asset” at companies in the survey sample is still quite vague and not specific Survey about expenses of exploration and evaluation of mineral resources: Survey results show that 70/70 companies have not capitalized exploration drilling expenses or added such expenses to FA value Survey about mining rights: Survey results show that 17/70 companies (accounting for 24,3%) has recognized mining rights in intangible FA Other companies considered mining rights as not eligible to be recognized as Fag; it is not certain that the exploration will bring about future economic benefit because mineral reserves are only estimated and actual exploration may prove different Particularly, there are companies that have not been decided where to recognized mining rights as intangible FA or long-term prepaid expenses Survey about environmental recovery expenses: Such expenses were incurred in 43/70 companies and were not capitalized into intangible FA 2.2.2 Classifying FA in mining companies in the Northern area Survey results show that 100^% of companies in the survey classified FA structure according to form 2.2.3 Characteristics of FA in mining companies in the Northern area Firstly, FA accounts for a high proportion in the total asset value of mining companies, he mining enterprises' assets, especially the passive FAs such as pits, houses, warehouses, vehicles, tools, machines, mining equipment Moreover, it takes long for the formation of FA so fixed capital turnover of companies is often slow Secondly, in mining enterprises, in addition to the usual FAs in industrial enterprises, there are also specialized FA for each specific industry that requires large investment capital, but have high level of risks due to reduced value during due such as coal presses, spectrum analyzers, screening systems, crane beams Thirdly, FA of mining companies are often used in special conditions such as pit, hills, mountain ranges without roads so FA in mining enterprises has a higher level of tangible wear and tear than FA of industrial enterprises in other fields Fourthly, mining machinery and equipment in mining companies in the Northern area mainly originated from Japan, G8 countries and Northern Europe; they are used for mining or manufacturing explosive materials with the aim of increasing competitiveness and creating the most prominent product of high productivity and quality This makes FA vulnerable to technology errors that create intangible wear and tear, requiring companies to have faster depreciation policies compared to those of other FAs Fifthly, tangible FA accounts for a high proportion of total assets, including mainly buildings, specialized mining machinery and vehicles such as: work houses, pit systems, compressors, crane, excavatos,etc Invisible FA accounted for a small proportion, mainly including land use rights, management software and mining rights Sixthly, FA in mining companies in the Northern area are mainly funded by the ownership capital, equity capital, and long-term loans 2.3 Current situation of FA financial accounting in mining companies in the Northern area 2.3.1 Receiving FA financial accounting information In the surveyed mining companies in the Northern region, the main means used to receive FAC information are accounting vouchers, documents and related documents to record economic transactions 2.3.2 Processing FA financial accounting information 2.3.2.1 Measuring FA value To measure FA value, mining companies in the Northern area use the original cost model through three basic criteria: cost, depreciation and value of FA In 100% of businesses surveyed, if costs incurred after initial recognition which helps extend the life of the FA or increase the future economic benefits of the enterprise from using FA, the expenses will be capitalized by companies in the historical cost of FA and gradually allocated to operating costs through FA depreciation In contrast, the expenses incurred which are not eligible for capitalization are recorded immediately in the production and business expenses in the period (if the value is small), the periods right before that (if accrued) or periods right after that (if the value is large, it needs to be allocated, without accruals) Survey results show that 64.3% (36/70) of mining enterprises have begun to receive and consider initial information related to FA impairment; however no company has applied impairment accounting The author has also conducted surveys of accountants at companies and experts about the implementation of FA impairment accounting 2.3.2.2.Recognizing FA financial accounting information 70/70 companies in the sample recognized FA financial accounting according to the government’s standards and accounting regime 2.3.3 Presenting and providing FA information in financial statements Survey results of financial statements in companies show that FA information was only completed in financial statements of big companies, especially listed companies For small and medium sized companies, FA information was only about synthesis data 2.4 Current situation of FA management accounting in mining companies in the Northern area 2.4.1 Collecting FA management accounting information According to the results of the survey, interviews and observations show that receiving information about FA includes implementation information related to FA procurement, equipment, depreciation, repair, transfer, liquidation, sales , future information about revenue estimates, FA market prices; and information about characteristics, usage and specifications of FA that companies are about to invest Regulations on coordinating work between FA accounting management department and related departments were still not tight; therefore the role of FA accounting management in many companies have not been fully brought into play 2.4.2 Processing FA management accounting information 2.4.2.1 Processing management accounting information to assist FA planning and decision making Decisions related to FA include: investment, use, depreciation, repair and disposal Company executives completely depend on forecast information they received about business plans, capability and economic potential, their goals and policies in each period to make appropriate decisions At present, investment planning before purchasing FA or creating FA in survyed mining companies in the Northern area is still optional; there are companies that did so and thosethat did not However, if there is an FA plan (in 51/70 companies), it is usually made by the internal accountant of the company; information is not disclosed to the public and is not created properly and adequately 2.4.2.2 Processing management accounting information to assist the decision making function in FA management To meet the need for information on implementing of FA decisions, 20% of mining companies in the Northern area opened FA entry for each asset and 100% of their detailed accounting book reflected FA fluctuations However, the reflection level of information depends on the management requirements of business executives and the accounting software used in each company 2.4.2.3.Processing management accounting information to assist the function of inspecting and evaluating FA usage Most mining companies in the Northern area have analyzed, assessed the situation of equipment and usage efficiency of assets in general and FA in particular but most of them (57/70) just have evaluated the technical status of FA usage by looking at damaged components, the extent of damage, repair plans Very few companies (13/70, accounting for 19%) have used financial indicators to process accounting information to serve the function inspecting and assessing FA management and usage 2.4.3 Presenting and providing FA informationn in management accounting report 70/70 companies have made management accounting reports about FA, but the report form is still inadequate and the usefulness of information is not high 2.5 Assessing the demand of applying in IAS / IFRS to FAC in mining companies in Vietnam 2.5.1 Evaluating the trend of applying IAS/IFRS in FAC in Vietnamese mining companies Though Vietnam does not being to the group of countries that apply 100% international standards, the Vietnamese accounting standards have high similarity However, when developing the national accounting standard system, the Ministry of Finance also made some adjustments to suit the socio-economic conditions in Vietnam 2.5.2 Surveying the demand of applying IFRS in FAC in mining companies Survey results show that all companies support the creation of a separate accounting standard system for mining exploration and valuation of mineral resources However, it is not possible to apply IFRS in a rigid manner; consideration is necessary to develop regulations suitable to the actual situation of Vietnamese accounting 2.6 Assessing the current situation of FAC in mining companies in the Northern area 2.6.1 Obtained results 2.6.2 Shortcomings 2.6.2.1 About FA identification VAS 03 and VAS 04 state that in order to be recognized as FA, assets of companies must meet four criteria However, the application of the two criteria "reliably determined" and " certainly will bring about future economic benefits" is still subjective; therefore when recognizing the same type of asset, companies often confuse between recognition of tangible FA and real estate investment or between intangible FA and business/production expenses For the expenses of exploration, initial valuation of mineral resources and additional exploration to discover new resources, the expenses of granting mineral rights are eligible for capitalization, but companies have recorded them as prepayment fee This does not satisfy the matching principle and does not comply with VAS 04 Moreover, many companies have also record the recovery expenses when it incurred and record the price of mining products in the incurred period; it does not comply with the matching principle and full disclosure principle because recovery expenses are related to the legal commitments of companies and affect revenue during the project implementation period but are recorded in one incurred period, thus affecting profit 2.6.2.2 About FA financial accounting Receiving input FAC information Mining companies in the Northern area have established system of FA documents that conform to regulations of the current accounting regime AT present, the goverment allows companies to print and design their accounting documents However, companies in the survey have mainly created documents in paper Measuring value and related cost of FA Firstly, the capitalization of interest into FA historical cost or not is still unclear Secondly, companies have only paid attention to applying traditional depreciation method (straight-line basis) Thirdly, the determination of FA depreciation time has not been implemented well Fourthly, no company has implemented FA imparment provision Recognizing FA financial accounting information The construction of the accounting account system that is appropriate with management requirements at the survey companies have not really been focused or applied effectively; therefore such system does not meet the management needs Opening a detailed account to track subjects is simple and is relatively in small quantity Most companies in the survey are using existing accounting software packages There is no account to reflect FA impairment Presenting and providing FA financial accounting FA Currently, information about FA in mining companies in the Northern area has been reflected in the balance statements, income statements and notes of financial statements quite adequately However, FA impairment has not been implemented Therefore, in context of international integration in the future, the presentation of information of this category in the financial statements will also need to be quickly implemented Moreover, according to the requirements of VAS 03 and VAS 04, in the Notes to financial statements, commitments on buying and selling FA of great value in the future such as investment plan, liquidation plan FA in the coming year must be presented However, few businesses in the survey have done this 2.6.2.3 FA management accounting Currently, most mining enterprises have not performed all the functions of FA accounting management In particular, mining enterprises in the survet have pain little attention on analyzing the efficiency of investment, management and use of assets or assessing the economic benefits created by FA in the period for companies 2.6.3 Reasons of shortcomings Objective reasons: There are inconsistencies in the system of accounting standards and lacking of harmony among related standards Many transactions already occurred but there are no guiding accounting standard, mechanism or the existing guidelines are unclear Subject reasons: Firstly, qualification and professional capacity of the accounting team in the enterprise is limited, uneven; accountants have not fully equipped with knowledge about FAC Secondly, the nature of FA transaction is complicated Thirdly, the record and management of FA receive assistance from information and technology but not much Fourthly, most mining companies in the Northern area have large scale, the number and types of FA are very large and distributed in many places Therefore, it causes difficulties in the management, monitoring and recording of FA Fifthly, awareness of executives about the role of FAC in assisting the decision making and management is still lacking CONCLUSION OF CHAPTER In chapter 2, the author has analyzed characteristics of the mining industry, management structure of mining companies in the Northern area through surveys of characteristics of the accounting practice and accounting apparatus , the current situation of FA identification and characteristics of FA mining companies in the Northern area In addition, the author has used qualitative methods (survey, interview, document collection ) and used excel spredsheet to process and analyze data in order to evaluate the current situation of FAC in mining companies in the Northern area from both financial accounting management accounting aspects Based on analysis, the author has pointed out obtained results, shortcomings and reasons of such shortcomings of FAC as the basis to propose recommendations in chapter nin line with conditions in the Northern area CHAPTER 3: SOLUTIONS TO IMPROVE FIXED ASSET ACCOUNTING IN MINERAL MINING COMPANIES IN THE NORTHERN AREA 3.1 Mineral and geological strategic orientations with vision up to 2030 3.1.1 Mineral strategic orientations with vision up to 2030 The strategy aims that that mineral mining must go hand in hand with processing and creating products of high economic value; the straegy’s vision to 2030 is to end fragmented mineral processing establishments that have outdated technologies, low economic efficiency and cause environmental pollution in order to to form concentrated mineral processing industrial parks with advanced technologies and scale compatible with the potential of each type of mineral 3.1.2 Mining planning in Vietnam with a vision to 2030 Meeting the country's demand for mineral products for the period after 2020 and can partly export mineral products 3.2 Principles to improve FAC in mining companies in the Northern area Firstly, harmoniously combine macro management requirements of the goverment and management requirements of company executives Secondly, in line with characteristics of business and operation as well as management requirements of mining companies Thirdly, ensure harmony with international accounting principles, standards, and practices Fourthly, ensure that adequate information is provided in a timely manner for users and that information has high realiability and legality Fifthly, meet the economic requirements brought about by FAC information Sixthly, in line with professional capability of accountants in companies Seventhly, towards increasingly intensive information technology application 3.3 Solutions to improve FAC in mining companies in the Northern area 3.3 Improving the FA indentification Firstly, regarding expenses of mineral exploration, initial valuation, additional exploration to discover resources According to IFRS 06, when the exploration activities clearly identify the mineral reserves and the company has the lawful rights to explore and exploit mineral mines as prescribed, the exploration expenses shall be recorded as invisible FA Therefore, companies should capitalize on expenses of exploration and valuation of mineral resources as intangible FA Secondly, regarding mining rights According to the author, mining rights completely satisfy criteria to identify A On the other hand, according to the current accounting regulation (Circular No 200/2014/TT BTC), mining rights is considered as a company’s FA Therefore, to match financial accounting and tax accounting in companies, the author thinks that mining rights should be recognized as intangible assets Thirdly, regarding recovery expenses According to the author, these are expenses incurred from transactions related to the initial investment asset system for mining (pit, equipment ) so they are eligible to be recognized as tangible FA for mining companies Fourthly, regarding real estate that are being used or leased (office building ) According to the author, companies should consider the initial purpose of real estate investment to record accurately and ensure the truthfulness and rationality of accounting information provided Specifically, if a company buys a building to use as its office but in the short term it has not used up and this company leases the unused part to increase income, the building must be recorded as the company’s FA 3.3.2 Improving FAC from financial accounting aspect 3.3.2.1 About receiving input FAC information Firstly, revise and add contents in existing FA documents Secondly, add more FA documents Thirdly, upgrade FA accounting and management softwares Fourthly, check and complete FA documents before entering into accounting book 3.3.2.2 Processing FAC information from financial accounting aspect About measuring value of FA Firstly, identify the initial value of FA Secondly, use appropriate method of depreciation of FA in mining companies Thirdly, identify impairment value of FA after initial recognition About recording FAC information Firstly, companies should improve the application of accounting account systen The legal basis for impleenting the account system at companies is stated in the current accounting law, decisions and circulars Secondly, for the detailed and general accounting book systems, currently mining companies in the Northern area have them to monitor accounting items related to FA 3.3.2.3 Presenting and providing FAC information in financial statements Improving the presentation of FAC information in the balance sheet, income statement, and notes to the financial statements 3.3.3 Improving FAC from management accounting aspect About receiving FAC information The author has proposed that before making decisions, companies need new investment plans so that they can actively mobilize funding for such activities At the same time, the author has also proposed the new form of FA usage planning About processing FA management accounting information Firstly, it is important to strengthen the management of usage, maintenance, and innovation of FA technology to help ensure that the business and production processes of companies run smoothy, improve labor productivity and create cost advantages Secondly, keepingmany unused FA will result in stagnant capital and waste while companies are in desperate need of capital for production and business activities Therefore, the management accountant should determine the cause of FA stagnation to quickly liquidate impaired FA, and at the same time assign unused FA for production to be used in other places and recover a part of invested capital Thirdly, build the system of criteria to assess investment efficiency and FA usage efficiency About presenting and providing FA management accounting information The author proposed additional forms of FA management accounting report to provide information for administrators to set goals, develop programs, plans, estimates and control the business production process 3.4 Conditions to implement solutions to improve FAC in mining companies in the Northern area 3.4.1 From state management agencies - The Ministry of Finance should continue to study, draft and issue a number of new accounting standards on “Decline in asset value:, “Long-term asset held for sales and terminated activities”, “Exploration and evaluation of resources and minerals” Also the ministry should adjust VAS 01, VAS 03, VAS 04 accordingly - Tax authorities should improve accounting capability of tax officials and avoid cases when they not carefully study guidelines in accounting standards and circulars or not timely updare new regulation, leading to inconsistancies between companies and tax agencies - The Vietnam Association of Accountants and Auditors and the Vietnam Association of Certified Public Accountants should strengthen information exchange and co-operation with regional and professional organizations, researches of new accounting standards in general and FA standards in particular to train and update knowledge for accountants in the most effective way 3.4.2 From mining companies in the North Firstly, mining companies in the Northern area should pay attention to human resource training and create favourable conditions in terms of equipment and other material conitions to help accountants improve their ability to receive, process, control and handle information Secondly, accounting practices must be done in accordance with specific conditions of companies and in line with regulations of the Law on Accounting Thirdly, management officers of such units as technical, administrative and accounting units in mining companies in the Northern are must fully identify activities related to FA that can occur in their units Fourthly, companies should improve the organization of production management mechanism, build an accounting organization model suitable to the characteristics and management requirements of their units Through researching and surveying actual conditions of mining companies in the Northern area nowadays, the author recommends that these enterprises should arrange FAC personnel to combine management accounting and financial accounting in the same accounting system CONCLUSION OF CHAPTER Based on shortcomings of the legal system in the theoretical accounting framework as the current situation of FAC in the Northern area, the author has provided some recommendations to improve FAC in the aspects of identifying FA, financial accounting and management accounting To implement these solutions, the author has also presented conditions for the government ( Ministry of Finance, tax agencies auditing professional associations), mining companies in the Northern area CONCLUSION The process of economic exchange and integration has made accounting an indispensable “business language” as the basis of business decisions, especially decisions on FA To minimize making mistakes in decisions on FA, information sources that companies use need to be consistent, valid and highly reliable This can only be achieved on the condition that the national accounting system must be based on a globally recognized system of accounting standards (IAS / IFRS) FA are very important and account for a large part in a company’s total asset value Studies to improve FAC in mining companies in the Northern area is necessary when the legal corridor of FAC is still limited, especially for distinctive business types like mining companies in Vietnam With such goal, the thesis has focused on solving the following issues: - Firstly, studying FAC from both financial accounting and management accounting aspects according to the processes of the accounting information system in Vietnamese companies in general and mining companies in the North in particular - Secondly, from analyzing the application of IAS/IFRS in some countries (Chinese, France) that have similarities with Vietnam, the thesis has drawn some valuable experience lessons to improve FAC in Vietnamese companies in general and in mining companies in the Northern area in particular from both financial accounting and management accounting aspects The thesis has also clarifies distinctive FA in mining companies: mining rights, mineral exploration expenses are intangible FA; environmental recovery expenses are direct cost that form the cost of tangible FA - Thirdly, through studying and carrying out surveys of the current situation of in mining companies in the Northern area from both financial accounting and management accounting aspects, the thesis has objectively evaluated achieved results, shortcomings, and reasons for shortcomings in FAC in these companies - Fourthly, solutions to improve FAC in mining companies in the Northern area in the thesis mainly focus on three groups of solutions to identify FA and FAC from both financial accounting and management accounting aspects Despite the author’s efforts, besides obtained results, there exists certain shortcomings in the thesis due to constraints of time, research budget, secondary data collecyion and processing methods…Several solutions are not applicable at present The author will continue to stuy and improve these issues in futher scientific researches The author would like to receive valuable comments from scientists and teachers to improve thesis List of the author’s published works No Name of works Writer(s) Source Some solutions to improve economic efficiency in mineral mining activities in Vietnam The author Business Magazine Entrepreneurship and Branding, issue 14, Dec 12, 2014 page 32 -36 Discussion on accounting of increases of purchased assets that must be installed and tested The author Review of Finance, issue 617, Sept 2015 page 54-56 What are solutions for accrual accounting of fixed asset impairment expenses? The author Review of Finance, issue 623, Dec 2015 page 37 -38 Tangible fixed asset accounting after initial recognition according to the reevaluation model in international accounting and experience lesson for Vietnamese The author Vietnam Trade and Industry Review, issue 1, Jan 2017, page 206 -211 Applying IFRS in fixed asset accounting in Vietnamese companies The author Vietnam Trade and Industry Review, issue 11, June 2019, page 448 -354 Co-writer Proceeding of the national conference VCAA 2019, University of Economics Ho Chi Minh City, Dec 2019 page 669-682 The impact of fixed asset structure on business efficiency of mineral mining companies in the Northern area ... integration has become stronger and stronger, leading to the harmonization and standardization of countries on international accounting This requires countries to pay attention to amending, supplementing... complying with Circular No 200/2014 / TT- BTC issued on December 22, 2014 on “Guidelines for accounting policies for enterprises” and Circular No 53/2006 / TT- BTC dated 12/6/2006 on "guiding the... functions of FA accounting management In particular, mining enterprises in the survet have pain little attention on analyzing the efficiency of investment, management and use of assets or assessing
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