Circular 48 / 2019 / TT-BTC Detailed guidance on the creation and handling of provisions for inventory devaluation, investment losses, doubtful receivables, and product, goods, service, and construction warranty in enterprises.
The following points should be noted regarding Circular 48/2019/TT-BTC:
Businesses eligible
1. This Circular provides guidance on the establishment and handling of provisions for inventory devaluation, provisions for investment losses, provisions for doubtful receivables, and provisions for product, goods, service, and construction warranty, as a basis for determining deductible expenses when calculating taxable corporate income according to regulations.
The creation of provisions for the purpose of preparing and presenting financial statements by economic organizations is carried out in accordance with accounting laws.
2. This Circular applies to economic organizations (hereinafter referred to as enterprises) established and operating in accordance with Vietnamese law.
What is contingency planning?
1. Provision for inventory devaluation: This is a provision made when the net realizable value of inventory falls below its book value.
2. Provision for investment losses: This is a provision for potential losses due to a decrease in the value of securities held by the enterprise, and a provision for potential losses due to a decrease in the value of other investments made by the enterprise in economic entities receiving capital contributions (excluding overseas investments).
3. Provision for doubtful receivables: This is a provision for the loss in value of accounts receivable that are overdue for payment and accounts receivable that are not yet due but are likely to be uncollectible on time.
4. Provision for product, goods, service, and construction warranty: This is a provision for costs related to products, goods, services, and construction projects that have been sold, supplied, or handed over to the buyer, but which the enterprise is still obligated to repair or complete according to the contract or commitment with the customer.
What is the purpose of loophole extraction in room setup?
The provisions stipulated in this Circular are included in deductible expenses when determining taxable income for corporate income tax purposes in the reporting year to offset potential losses in the following reporting year; ensuring that the enterprise reflects the value of inventory and investments at no higher than market prices, and the value of accounts receivable at no higher than the recoverable value at the time of preparing the annual financial statements.
Effective date
1. This Circular takes effect from October 10, 2019 and applies from the 2019 fiscal year.
2. Repeal Circular No. 228/2009/TT-BTC dated December 7, 2009 of the Ministry of Finance guiding the regime for the establishment and use of provisions for inventory devaluation, losses on financial investments, uncollectible receivables, and product, goods, and construction warranty at enterprises; Circular No. 34/2011/TT-BTC dated March 14, 2011 of the Ministry of Finance amending Circular No. 228/2009/TT-BTC dated December 7, 2009; Circular No. 89/2013/TT-BTC dated June 28, 2013 of the Ministry of Finance amending and supplementing Circular No. 228/2009/TT-BTC dated December 7, 2009; and other documents regulating the establishment and use of provisions that are contrary to the provisions of this Circular.
3. The establishment of provisions in enterprises operating in certain specific sectors (insurance, securities, capital investment, debt trading, retail sales of goods on deferred/installment payments) shall be carried out in accordance with the guidelines in this Circular and according to separate regulations (if any) appropriate to their specific characteristics as guided by the Ministry of Finance.
4. State-owned enterprises and enterprises wholly owned by state-owned enterprises that are converted into joint-stock companies shall handle provisions in accordance with the law on equitization.
5. Any remaining provisions for overseas investments that the enterprise had set aside before the effective date of this Circular (if any) shall be reversed and recorded as a reduction in expenses at the time of preparing the 2019 financial statements.
During the implementation process, if any difficulties arise, please report them promptly to the Ministry of Finance for review, supplementation, and amendment.
See Circular 48/2019/TT-BTC here.
