On October 13, 2016, the Ministry of Finance issued Circular 147/2016/TT-BTC amending and supplementing a number of articles of Circular No. 45/2013/TT-BTC dated April 25, 2013 guiding the management, use and depreciation of fixed assets.
Accordingly, Circular 147/2016/TT-BTC supplements the regulations for mixed-use properties that are both used as operating assets of the enterprise and for sale or lease in accordance with the law. The enterprise must identify and separate the portion of the asset (area) intended for sale or lease, and this portion cannot be accounted for as a fixed asset and cannot be depreciated.
If the portion of an asset intended for sale or lease cannot be identified or separated, the enterprise shall not account for the entire asset as a fixed asset and shall not depreciate it.
Circular 147/2016/TT-BTC also adds Point a, Clause 1, Article 6. Specifically, for tangible fixed assets, enterprises classify them as follows:
Type 1: Buildings and structures: These are fixed assets of a business that are formed after the construction process, such as office buildings, warehouses, fences, water towers, yards, decorative structures for buildings, roads, bridges, railways, airport runways, piers, docks, and slipways.
Type 2: Machinery and equipment: refers to all types of machinery and equipment used in the business operations of an enterprise, such as specialized machinery, work equipment, oil and gas drilling rigs, cranes, production lines, and individual machines.
Type 3: Transportation vehicles and transmission equipment: These include various types of transportation vehicles such as rail, water, road, air, and pipeline transport, as well as transmission equipment such as communication systems, electrical systems, water pipes, conveyor belts, and gas pipelines.
Type 4: Management equipment and tools: These are devices and tools used in the management of a business's operations, such as computers for management, electronic equipment, measuring and quality control equipment and tools, dehumidifiers, vacuum cleaners, and pest control equipment.
Type 5: Perennial plantations, working animals and/or animals providing products: These include perennial plantations such as coffee plantations, tea plantations, rubber plantations, fruit orchards, lawns, green areas, etc.; and working animals and/or animals providing products such as herds of elephants, horses, buffaloes, cattle, etc.
Type 6: Fixed assets are infrastructure, of significant value, built by the State using state budget funds and entrusted to economic organizations for management and operation.
Type 7: Other fixed assets: These are all other fixed assets not listed in the six categories above.
In addition, Circular 147/2016/TT-BTC also stipulates that fixed assets of type 6, as specified in Clause 2, Article 1 of this Circular, when sold or liquidated, must have the written consent of the state ownership representative agency and be accounted for as a reduction in the enterprise's working capital.
The proceeds from the sale, after deducting sale and liquidation costs, shall be fully remitted to the state budget or added to the charter capital after obtaining written approval from the financial authority and the state ownership representative agency.
According to the supplementary regulations in Circular 147/2016/TT-BTC, fixed assets of type 6 as stipulated in Clause 2, Article 1 of this Circular are not subject to depreciation; only a detailed ledger must be maintained to track the annual depreciation value of each asset, and the capital used to form the asset cannot be reduced.
For investment projects under the Build-Operate-Transfer (BOT) model and Business Cooperation Contract (BCC) projects, the depreciation period for fixed assets is determined as the period during which the investor recovers their investment in the project.
The depreciation of fixed assets formed from the project is calculated at a rate corresponding to the annual revenue, consistent with the project's toll collection period for capital recovery (similar to the depreciation method based on the quantity or volume of products). The valuation of fixed assets formed from the project is carried out in accordance with the law on basic construction investment.
This Circular takes effect from November 28, 2016 and applies from the 2016 fiscal year.
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