| THE FINANCIAL | SOCIAL REPUBLIC OF VIETNAM Independence - Freedom - Happiness |
| Number: 1676/QD-BTC | Hanoi, date 01 month 9 year 2021 |
APPENDIX NO. 04
VIETNAMESE PUBLIC ACCOUNTING STANDARD NO. 17
REAL ESTATE, FACTORIES AND EQUIPMENT
(Attached to Decision No. 1676/QD-BTC dated September 1, 2021 of the Ministry of Finance)
INTRODUCTION
The Vietnamese public accounting standards system was researched and developed by the Public Accounting Standards Drafting Committee under the Ministry of Finance to ensure compliance with international accounting practices and suitability to the actual conditions of Vietnam. Vietnamese public accounting standards share the same standard designations as their corresponding international public accounting standards.
Vietnamese Public Sector Accounting Standard (VPSAS) No. 17 "Real estate, factories and equipment" This document is drafted based on International Public Sector Accounting Standard (IPSAS) No. 17. "Real estate, factories and equipment" and current regulations on Vietnam's financial and budgetary mechanisms. Vietnamese Public Sector Accounting Standard No. 17 stipulates provisions consistent with current Vietnamese legal regulations and provisions that may be amended or supplemented in the future. Vietnamese Public Sector Accounting Standard No. 17 does not stipulate provisions of International Public Sector Accounting Standard No. 17 that are inconsistent with the long-term financial and budgetary mechanisms; any additions will be made based on the actual situation in each appropriate period.
International Public Sector Accounting Standard 17 is the basis of the 2001 version, amended to conform with other international public sector accounting standards as of December 31, 2018, as issued by the International Public Sector Accounting Standards Board (IPSASB).
Vietnamese Public Sector Accounting Standard No. 17 uses paragraph numbering that differs from International Public Sector Accounting Standards. For comparison, a table of paragraph numbering references for Vietnamese Public Sector Accounting Standard No. 17 is included with this standard. For content relating to other public sector accounting standards, Vietnamese Public Sector Accounting Standard No. 17 cites the symbols and names of the relevant published Vietnamese public sector accounting standards. For standards not yet published, this standard only states the name of the standard or the relevant content to be referenced, without citing the numbers of the relevant standards as in International Public Sector Accounting Standard No. 31. Specific citations of the symbols and names of the standards will be made after the relevant standards are published.
At the time of the issuance of Vietnamese Accounting Standard No. 17 (2021), the following related standards had not yet been issued:
|
STT |
Name of public accounting standard |
The section contains referenced content. |
|
1 |
Property leasing |
5, 36, 59, 61 |
|
2 |
Investment properties |
6 |
|
3 |
Borrowing costs |
30, 32 |
|
4 |
Accounting policies, changes in accounting estimates, and errors. |
40, 55 |
|
5 |
Revenue from exchange transactions |
60, 61, 64 |
|
6 |
Provisions, contingent liabilities, and contingent assets. |
26 |
VPSAS 17 – REAL ESTATE, FACTORY AND EQUIPMENT
The process of issuing and updating Vietnamese Public Sector Accounting Standard No. 17
(hereinafter referred to as the Standard)
Version 17 of the Vietnamese Public Sector Accounting Standard was first issued under Decision No. 1676/QD-BTC dated September 1, 2021, by the Minister of Finance.
This standard came into effect on September 1, 2021, and is applicable from September 1, 2021.
The following standards are in effect:
– Vietnamese Public Sector Accounting Standard No. 01: Presentation of Financial Statements;
– Vietnamese Public Sector Accounting Standard No. 02: Cash Flow Statement;
– Vietnamese Public Sector Accounting Standard No. 12: Inventory;
– Vietnamese Public Sector Accounting Standard No. 31: Intangible Assets.
VPSAS 17 – REAL ESTATE, FACTORY AND EQUIPMENT
CONTENT
The content of Vietnamese Public Sector Accounting Standard No. 17 “Property, Plant and Equipment” is presented from paragraph 1 to paragraph 70. All paragraphs are equally valid.
Reference table of paragraphs of Vietnamese public sector accounting standards compared with paragraphs of international public sector accounting standards.
I. GENERAL PROVISIONS
Purpose
1. The purpose of this standard is to prescribe the accounting methods for real estate, plant and equipment so that users of financial statements can understand information about the entity's investments in real estate, plant and equipment and changes to those investments. The fundamental issues for accounting for real estate, plant and equipment are: asset recognition, asset valuation, and the recognition of depreciation expense.
Limit
2. Entities that prepare and present financial statements on an accrual basis shall apply this standard to the accounting of real estate, plant and equipment, unless:
(a) Other accounting methods applied in accordance with the provisions of other Vietnamese public sector accounting standards; and
(b) Assets considered as inheritance. However, some of the information disclosure requirements set forth in paragraphs 66 and 67 apply to assets that are recognized as inheritance.
3. This standard applies to real estate, factories and equipment, including:
(a) Infrastructure; and
(b) Assets subject to franchise agreement after initial recognition and valuation. (Franchiser)
4. This standard does not apply to:
(a) Biological assets related to agricultural activities that are not perennial crops for production. This Standard applies to perennial crops for production but not to the products on those perennial crops;
(b) Rights to mine and exploit mineral resources such as oil, natural gas and similar non-renewable resources.
However, this standard applies to real estate, factories and equipment used to develop or maintain the assets referred to in section 4(a) or 4(b).
5. Other Vietnamese public accounting standards may prescribe the recognition of real estate, plant and equipment items using an approach different from that of this standard. For example, the Vietnamese public accounting standard on leases prescribes the initial valuation and recognition of leased real estate, plant and equipment on the basis of the transfer of risks and benefits between the parties; or prescribes the initial valuation and recognition of real estate, plant and equipment used in a service concession agreement on the basis of asset control. However, in those cases, other accounting provisions for these assets, including depreciation, are provided in this standard.
6. Entities using the cost model for investment properties in accordance with Vietnamese public sector accounting standards on investment properties shall apply the provisions of these standards on determining the value after initial acquisition and depreciation.
Heritage
7. This standard does not require an entity to recognize estates even if they meet the definition and recognition criteria for real estate, plants, and equipment. If an entity recognizes estates, it must apply the information presentation provisions of this standard and may, but is not required to, apply the valuation provisions of this standard.
8. Some properties are considered heritage due to their cultural, environmental, or historical significance. Examples include historic buildings, monuments, archaeological sites, antiquities, national treasures, museum exhibits, historical sites, conservation areas and nature reserves, and works of art. Heritage properties often exhibit certain characteristics (though these are not the only characteristics of the property), including:
(a) Their cultural, environmental, educational and historical value cannot be fully reflected in financial value determined purely on the basis of market price;
(b) The law prohibits or severely restricts the sale of these assets;
(c) These assets are generally irreplaceable and their value may increase over time even though their physical condition may deteriorate; and
(d) It is difficult to estimate the useful life of these assets, which in some cases can be up to several hundred years.
Public sector entities may hold large amounts of inherited assets acquired over the years through various means, including acquisition, donation, management, and confiscation. These assets are rarely held for economic purposes and may face social or legal barriers to their use for economic purposes.
9. Some heritage items, in addition to their intrinsic value, also possess future economic benefits or potential services, such as a historic building used as an office. In these cases, they may be recognized and valued on the same basis as other real estate, factory, and equipment items. For other heritage items, the future economic benefits or potential services are limited by their heritage characteristics, such as monuments and historical sites. The existence of both future economic benefits and potential services may influence the choice of valuation basis.
10. The information disclosure requirements in paragraphs 66 to 70 require entities to disclose information about the assets they recognize. Therefore, entities recognizing assets as heritage must disclose information about these assets in aspects such as:
(a) The basis for determining value is applied;
(b) The depreciation method applied, if any;
(c) Original cost;
(d) Accumulated depreciation up to the end of the period, if any; and
(e) A table comparing the remaining value at the beginning and end of the period, which presents certain details.
Definitions
11. The terms in this standard are understood as follows:
Real estate, factories, and equipment are tangible assets:
(a) Held for use in management or in the production, provision of goods, services, or leasing; and
(b) Estimated usage time per reporting period.
Perennial plants that produce crops are living plants:
(a) Used in the production or supply of agricultural products;
(b) Expected to produce the product for more than one period; and
(c) It is unlikely to be sold as an agricultural product, except in the case of emergency liquidation.
The residual value (applicable to this standard) is the value of the asset as recognized after deducting accumulated depreciation.
The depreciable value is the original cost of the asset or other equivalent value minus (-) the recoverable salvage value.
The recoverable salvage value of an asset is the estimated value that an entity would obtain from the disposal of the asset, after deducting estimated disposal costs, if the asset has reached the end of its useful life or is due for disposal.
Depreciation is the systematic allocation of the depreciable value of an asset over its useful life.
The group of real estate, plant and equipment are assets that share a similar nature or function in the entity's operations, and are reflected as a separate item for informational purposes in financial reporting.
Service franchise assets: These are assets used to provide public services under a service franchise agreement.
(a) Case provided by the operator:
(i) Is an asset constructed, developed, or purchased from a third party by the operator; or
(ii) It is an asset readily available to the operator.
(b) In the case provided by the licensor:
(i) Is an existing asset of the licensor; or
(ii) An upgraded asset derived from the licensor's existing asset.
A franchise agreement is a binding agreement between the franchisor and the operator, in which:
(a) The operator uses the franchised property to provide public services on behalf of the licensor for a specified period of time; and
(b) The operator shall be compensated for its portion of the service during the term of the service franchise agreement.
The useful usage time is:
(a) The period of time during which an asset is expected to be usable by the entity;
(b) The quantity of products or similar units expected to be produced by the entity from the asset.
Terms defined in other Vietnamese public sector accounting standards used in this standard have the same meaning as in those standards.
II. SPECIFIC REGULATIONS
Note
12. The original cost of a real estate, plant, and equipment item must be recognized as an asset if and only if:
(a) The entity has a certain ability to obtain future economic benefits or potential services from the asset; and
(b) The original cost or fair value of the asset can be reliably determined.
13. Items such as spare parts, spare equipment, and maintenance equipment are recognized in accordance with this standard when they meet the definitions and recognition criteria for real estate, plant, and equipment. If they do not meet the definitions and recognition criteria for real estate, plant, and equipment, these items are classified as inventory.
14. This standard does not specify how individual assets constitute a real estate, plant, and equipment item at the time of recognition. Therefore, the entity must assess the application of asset recognition criteria in each specific case. The aggregation of individual assets of low value, such as library books, computer accessories, and small equipment, to apply the recognition criteria to total value may be considered appropriate.
15. The entity must apply this recognition principle to assess the original cost of real estate, plant and equipment when it is acquired. Original cost includes the initial costs incurred when acquiring or constructing an item of real estate, plant and equipment and subsequent costs incurred to supplement, replace parts or accessories to that asset.
Infrastructure assets
16. Some assets are classified as infrastructure. Infrastructure assets typically exhibit some or all of the following characteristics:
(a) These assets are part of a system or network;
(b) These assets are specialized in nature and have no substitute uses;
(c) These assets are immovable; and
(d) These assets may be subject to resale restrictions.
Public and commercial entities may own or be entrusted with the management of infrastructure, with key infrastructure typically managed within the public sector. Infrastructure meets the definition and recognition standards for real estate, buildings, and equipment and must be accounted for in accordance with this standard. Examples of infrastructure include: road systems, airport systems, railway systems, maritime systems, inland waterway systems, irrigation systems, industrial park and export processing zone infrastructure, commercial infrastructure, drainage systems, water and energy supply systems, and telecommunications systems.
Initial cost
17. Real estate, factory and equipment may be purchased for safety or environmental protection reasons. The purchase of such real estate, factory and equipment, while not directly increasing the future economic benefits or potential services of a particular existing real estate, factory and equipment item, is necessary for the entity to perform its assigned tasks or to obtain future economic benefits or potential services from other assets.
These real estate, factory, and equipment items qualify as assets because they enable the entity to perform its assigned tasks or to obtain future economic benefits or potential services from other assets that would be greater than would be possible without them. For example, a fire safety regulation requires a hospital to install a new fire safety system. This system is recognized as an asset because without it, the hospital cannot operate in accordance with the regulations.
Costs after initial recognition
18. Under the recognition principles set out in paragraph 12, an entity shall not recognize the operating expenses of a real estate, plant, and equipment item in the cost of that asset. Instead, these expenses shall be recognized in a surplus or deficit in the period in which they are incurred. Basic operating expenses include labor and materials costs, and may include the cost of replacing minor parts. The purpose of these expenses is generally considered to be “repair and maintenance” of the real estate, plant, and equipment.
19. Some parts of real estate, plant and equipment may require periodic replacement. For example, the surface of a road may need to be redone after a certain number of years. Real estate, plant and equipment may also require less frequent periodic replacements (such as replacing interior walls in a building) or non-periodic replacements. Under the recognition principle set out in paragraph 12, an entity recognizes the cost of replacing parts of a real estate, plant and equipment item in the cost of that asset when the replacement cost is incurred if the recognition criteria are met. The cost of the replaced parts will be written down in accordance with the write-down criteria set out in this standard (see paragraphs 59-65).
20. To continue in use, real estate, factory buildings, and equipment require regular major technical inspections to detect damage, regardless of whether replacement parts are necessary. The cost of such major inspections is recognized in the cost of the fixed asset as a replacement cost if recognition criteria are met. The portion of the value recorded in the cost of the previous inspection (separate from the value of the physical parts) is reduced when the new cost is recognized. This is regardless of whether the cost of the previous inspection was determined at the time of acquisition or construction of the asset. If necessary, the estimated cost of similar future inspections may be used as a basis for determining the cost of an inspection that existed at the time of acquisition or construction of the asset.
Determine the value when recording.
21. Real estate, factory buildings, and equipment that meet the criteria for asset recognition must be valued at their original cost.
22. When an asset is acquired through a non-exchange transaction, the original cost of the asset is determined at its fair value on the date of acquisition.
23. An entity may acquire real estate, factory buildings, and equipment through a non-exchange transaction. For example, land may be allocated by the state for the construction of parks and roads. The entity may also acquire assets through a non-exchange transaction by taking over confiscated assets. In these cases, the original cost of the asset is its fair value on the date of acquisition.
Components that make up the original cost.
24. The original cost of a property, factory, and equipment includes:
(a) The purchase price of the asset, including import duties and taxes on the purchase of the asset that are not refundable or deductible after deducting any discounts and trade rebates.
(b) Costs directly related to bringing the asset to the location and condition required to be ready for operation as intended by the entity.
(c) Initial estimates of the dismantling, relocation, and site restoration costs incurred by the entity when acquiring the asset or using the asset for a specified period for purposes other than producing inventory during that period.
25. Examples of direct costs are:
(a) Labor costs arising directly from the construction or acquisition of real estate, factories and equipment;
(b) Site preparation costs;
(c) Initial transport and handling costs;
(d) Installation costs;
(e) Commissioning costs after deducting proceeds from the sale of products manufactured during the process of bringing the asset to site and into operational readiness (e.g., prototypes manufactured during equipment testing); and
(f) Expert fees.
26. The entity applies Vietnamese Public Sector Accounting Standard No. 12 “Inventories” in cases where the costs of dismantling, relocating, and restoring a fixed asset arise within a specific period during which the asset is used to create inventory. These dismantling, relocating, and restoration costs, accounted for in accordance with VPSAS 12 or VPSAS 17, are recognized and valued according to the provisions of Vietnamese Public Sector Accounting Standards on provisions, contingent liabilities, and contingent assets.
27. Examples of expenses not included in the cost of real estate, factory buildings, and equipment:
(a) Costs of opening a new factory;
(b) Costs of introducing a new product or service (including costs for advertising and promotional activities);
(c) Costs of expanding business operations to a new location with a new customer segment (including employee training costs); and
(d) Administrative expenses and other general expenses of the unit.
28. The recognition of costs in the cost of real estate, plant and equipment ceases when the asset is in the location and condition ready for operation as intended by the entity. Therefore, costs incurred during the use or reallocation of the asset are not included in its cost. For example, the following costs are not included in the cost of real estate, plant and equipment:
(a) Costs incurred when an asset is capable of operating as intended by the entity but is not yet in use or when the asset is operating below its maximum capacity;
(b) Initial operating losses, for example, losses incurred as demand for output increases; and
(c) Costs of relocating and restructuring part or all of the unit's operations.
29. Certain activities occur in connection with the construction or development of real estate, plants, and equipment but do not necessarily bring the asset to the intended location and operational status. These activities may occur before or during the construction or development of the asset. For example, the entity may use a construction site as a parking lot to collect fees until construction begins. These activities do not necessarily bring an asset to a location and operational status; the revenue and associated costs of these activities are recognized as a surplus or deficit for the period, classified as revenue and expenses for the period.
30. The cost of an asset created by the entity is determined according to the same principles as an asset purchased. If the entity creates similar assets for sale in a normal operating cycle, the cost of the asset is the cost of creating one asset for sale (see Vietnamese Public Sector Accounting Standard No. 12).InventoryTherefore, internal surplus is excluded when calculating the cost of the asset. Similarly, the cost of raw materials, labor, or other expenses incurred in excess of normal levels during the creation of the asset are also excluded from the cost of the asset. The recognition of interest expense in the cost of a real estate, factory, and equipment item created by the entity itself is carried out in accordance with the provisions of Vietnamese public sector accounting standards on borrowing costs.
31. Perennial crops are accounted for similarly to real estate, plant and equipment created before they are in place and ready for operation as intended by the entity. Therefore, the term “created” in this standard is understood to include the activities necessary to cultivate perennial crops before they are in place and ready for operation as intended by the entity.
Determine the original cost.
32. The cost of real estate, plant and equipment is the purchase price in cash or fair value for the assets referred to in paragraph 22 at the recognition date. If the asset is paid for on deferred payment terms, the difference between the cash purchase price and the total amount paid on deferred payment terms is recognized as interest expense during the deferred payment period, unless this interest is recognized in the asset value in accordance with an accepted alternative method as prescribed in the Vietnamese Public Sector Accounting Standard on Borrowing Costs.
33. An entity may acquire one or more real estate properties, factories, and equipment through exchange with one or more non-monetary assets, or a combination of both monetary and non-monetary assets. The provisions below only refer to the exchange of one non-monetary asset for another, but also apply to all exchange transactions mentioned above. The cost of the received real estate, factories, and equipment is the fair value of that asset unless the exchange transaction is non-commercial in nature or the fair value of the received asset and the exchanged asset cannot be reliably determined. The cost of the received asset is determined as described above, even if the entity cannot immediately write down the exchanged asset. If the cost of the received asset cannot be determined at fair value, it must be determined at the remaining book value of the exchanged asset.
34. The entity must determine whether an exchange transaction is commercial in nature by considering the expected extent of future changes in cash flows or services resulting from the transaction. An exchange transaction is commercial in nature if:
(a) The constituent elements (risk, time, value) of the potential cash flows or services of the asset received differ from the constituent elements of the potential cash flows or services of the asset given in exchange; and
(b) The difference in item (a) is significantly related to the fair value of the assets being exchanged.
35. In the absence of comparable market transactions, the fair value of an asset is reliably determined if: (a) the difference in fair value estimates is negligible for the asset, or (b) the likelihood of different estimates can be appropriately assessed and used to estimate the fair value. If the entity is able to reliably determine the fair value of the asset received or exchanged, the fair value of the asset exchanged shall be used to determine the cost of the asset received, unless there is clearer evidence of the fair value of the asset received.
The original cost of real estate, factory buildings, and equipment held by a lessee under a lease agreement is determined according to the provisions of Vietnamese public sector accounting standards on leases.
Determine the value after initial recording.
37. Once recognized as an asset, a property, plant, and equipment are reflected at their original cost less accumulated depreciation.
Depreciation
38. Each component of real estate, factory buildings, and equipment that contributes significantly to the total original cost of the asset must be depreciated separately.
39. An entity allocates the initial recognized value of real estate, plant, and equipment to the significant components of that asset and depreciates each component separately. For example, for a road system, the entity may separately depreciate sidewalks, pavements, curbs, pipelines, walkways, bridges, and lighting systems within a road system. Similarly, if the entity purchases real estate, plant, and equipment for an operating lease where the entity is the lessor, the entity may separately depreciate the amounts reflected in the asset's cost arising from lease terms that are favorable or unfavorable to market conditions.
40. Significant components of real estate, factory buildings, and equipment that have the same useful life and depreciation method may be aggregated when calculating depreciation.
41. When an entity separately depreciates certain parts of real estate, plant and equipment, it shall also separately depreciate the remainder of that asset. The remainder comprises individual parts of negligible value. If the entity has different estimates for the remainder, it shall use approximate methods to depreciate the remainder so that the cost of consumption and/or useful life of these parts is fairly represented.
42. The entity may choose to depreciate separately each component of real estate, plant and equipment whose value is insignificant compared to the total original cost of the asset.
43. Depreciation expenses incurred in each period must be recognized in the surplus or deficit of that period, unless the depreciation expense is included in the value of another asset.
44. Depreciation expense in a period is usually recognized in the surplus or deficit of that period. However, in some cases, the future economic benefits or potential services associated with an asset are used by the entity to produce other assets. In this case, depreciation expense is a component of the cost of another asset and is included in the cost of that asset. For example, depreciation of a plant and production equipment is included in the cost of processing inventory (see Vietnamese Public Sector Accounting Standard No. 12).Inventory”). Similarly, depreciation of real estate, plants, and equipment used for development activities may be included in the original cost of intangible assets recognized under Vietnamese Public Sector Accounting Standard No. 31.Intangible assets".
Depreciation value and depreciation period
45. The depreciable value of an asset must be systematically allocated over its useful life.
46. The recoverable salvage value and useful life of an asset must be reviewed at least annually. If there are changes from previous estimates, such changes must be recognized as a change in accounting estimates in accordance with the Vietnamese Public Sector Accounting Standard on Accounting Policy, Changes in Accounting Estimates and Errors.
47. Depreciation must be recognized even if the fair value of an asset exceeds its residual value, provided that the recoverable salvage value of the asset does not exceed its residual value. Repair and maintenance of an asset does not negate the need for depreciation. Conversely, some assets may not be well maintained, or maintenance may be indefinitely delayed due to budget constraints. When asset management increases the natural wear and tear of the asset, the asset's useful life must be reassessed and adjusted accordingly.
48. The depreciable value of an asset is determined after subtracting its recoverable salvage value. In practice, the recoverable salvage value of an asset is often negligible and therefore does not significantly affect the calculation of the depreciable value.
49. The recoverable salvage value of an asset may increase to a level equal to or greater than its residual value. In this case, depreciation expense is zero, unless and until the recoverable salvage value of the asset subsequently falls below its residual value.
50. Depreciation begins when an asset is put into use, specifically when it is in the location and condition necessary to be ready for operation as intended by the entity. Depreciation ends when the asset is written off. Therefore, depreciation does not stop when the asset is temporarily out of service or operating at a reduced capacity and is held for disposal, unless the asset has been fully depreciated. However, under the production-based depreciation method, depreciation expense may be zero when there is no production activity.
51. The future economic benefits or potential services associated with a property, plant, and equipment are primarily derived by the entity through the use of the asset. However, other factors such as technical or commercial obsolescence and natural wear and tear when the asset is not used regularly lead to a decrease in the potential economic benefits or services that the asset could provide. Therefore, when determining the useful life of an asset, the following factors must be considered:
(a) Estimated utilization level of the unit for the asset. Utilization level is estimated through projected capacity or output.
(b) Expected physical wear and tear, depending on factors related to operation such as the number of shifts the asset will be used, repair and maintenance programs and care, and maintenance of the asset during downtime.
(c) Technical or commercial obsolescence arising from changes or improvements in production or from changes in market demand for the product or service that is the output of the asset. A decrease in the expected future selling price of a produced product may indicate the expected technical or commercial obsolescence of the asset in use, which may reflect a decrease in the future economic or potential service benefits of that asset.
(d) Legal or similar limitations on the use of the property, such as the expiration date of lease agreements.
52. The useful life of real estate, plant, and equipment is determined based on the benefits the asset provides to the entity. The asset management policy applied to the entity may stipulate that the asset is disposed of after a certain period or after a certain percentage of the total future economic benefits or potential services associated with the asset has been obtained. Therefore, the useful life of an asset for the entity may be shorter than its actual useful life. Estimating the useful life of a real estate, plant, and equipment is judged based on the entity's experience with similar assets.
53. Land use rights and buildings on the land are two separate types of assets and are accounted for separately even if they are purchased together. Buildings have a finite lifespan and therefore must be depreciated. An increase in the value of the land on which the building is constructed does not affect the determination of the depreciable value of the building.
Depreciation method
54. The depreciation method must reflect how the entity anticipates obtaining future economic benefits or potential services from the asset.
55. The depreciation method applied to an asset must be reviewed at least every annual reporting period. If there is a substantial change in the way future economic benefits or potential services are derived from the entity's asset, the depreciation method must be changed to reflect this new method. Such changes must be recognized as a change in accounting estimate in accordance with the Vietnamese Public Sector Accounting Standard on Accounting Policy, Changes in Accounting Estimates and Errors.
Several depreciation methods can be applied to systematically allocate the depreciable value of an asset over its useful life. These methods include straight-line depreciation, declining balance depreciation, and production depreciation. Depreciation expense under the straight-line method remains constant throughout the asset's useful life if its salvage value does not change. Under the declining balance depreciation method, depreciation expense decreases over the asset's useful life. Depreciation expense under the production method is calculated based on the number of products produced or the estimated level of asset use.
The entity must choose a depreciation method that most reasonably reflects how future economic benefits or potential services associated with the asset will be obtained. That method must be applied consistently across accounting periods unless there is a change in how future economic benefits or potential services of the asset will be obtained.
57. The depreciation method based on revenue generated from the use of the asset is inappropriate. Revenue generated from the use of the asset typically reflects factors other than the recovery of the asset's potential economic or service benefits. For example, revenue is affected by other inputs and processes, sales activities, changes in volume and selling price. The price component of revenue may be affected by inflation without being affected by how the asset is used.
Record a decrease in assets.
58. The residual value of real estate, factories, and equipment must be written down when:
(a) Liquidation of assets, transfer of assets; or
(b) When no future economic benefits or potential services are obtained from the use or disposal of the asset.
59. Gains or losses arising from write-offs of real estate, plant and equipment must be recognized in the surplus or deficit of the period in which the asset is written off (except where Vietnamese public sector accounting standards on leasing provide otherwise regarding sale and leaseback).
60. However, if, during its normal operating cycle, the entity regularly sells real estate, factory buildings, and equipment it holds for the purpose of leasing them out, then the entity must account for these assets as inventory at their remaining value when they are not leased out and sold. The proceeds from the sale of these assets must be recognized as revenue in accordance with the Vietnamese Public Sector Accounting Standard on Revenue from Exchange Transactions.
61. The write-off of real estate, plant and equipment can be done in various forms (e.g., sale, financial lease or donation). When determining the write-off of an asset, the entity must apply the standards in the Vietnamese Public Sector Accounting Standard on Revenue from Exchange Transactions to recognize revenue. The Vietnamese Public Sector Accounting Standard on Leases applies to write-offs of assets by selling and then leasing back the same asset.
62. In accordance with the recognition principle in paragraph 12, if an entity recognizes the value of a replacement part in the cost of real estate, plant and equipment, it must reduce the residual value of the replaced part, regardless of whether the replaced part is depreciated separately. If the entity cannot determine the residual value of the replaced part, it may use the value of the replacement part as the basis for calculating the residual value of the replaced part when it is acquired or constructed.
63. The gain or loss arising from the write-off of an asset, plant, and equipment is determined as the difference between the net proceeds from the disposal (if any) and the remaining value of the asset.
64. Receivables from the liquidation of real estate, plants, and equipment are initially recognized at fair value. If the assets are liquidated on deferred payment terms, the receivables are initially recognized at their cash equivalents if paid immediately. The difference between the cash purchase price and the total amount paid on deferred payment terms is recognized as interest earned during the deferred payment period, as stipulated in Vietnamese public sector accounting standards on revenue from exchange transactions.
Presenting information
65. The financial statements must present the following information regarding each group of real estate, plant and equipment recognized in the financial statements:
(a) The basis for determining value used to determine the original cost;
(b) The depreciation method applied;
(c) Useful life or applicable depreciation rate;
(d) Original cost and accumulated depreciation at the beginning and end of the period; and
(e) A reconciliation table of the remaining value of assets at the beginning and end of the period, which presents the following information:
(i) Increase during the period;
(ii) Number acquired through merger of public units;
(iii) Number of liquidations and transfers during the period;
(iv) Depreciation amount recorded during the period;
(v) Net exchange rate differences arising from the conversion of financial statements from one accounting currency to another reporting currency, including the conversion of financial statements of a foreign operating entity to the entity's reporting currency; and
(vi) Other changes.
66. The financial statements must also present the following information regarding each group of real estate, plant and equipment recognized in the financial statements:
(a) Restrictions and values of real estate, factories and equipment mortgaged to secure liabilities;
(b) Costs recognized in the value of real estate, plant and equipment under construction;
(c) The value of commitments to purchase real estate, factory and equipment.
67. The choice of depreciation method and estimated useful life of an asset is made by the entity within the framework of legal regulations. Therefore, presenting information on depreciation methods and estimated useful life or depreciation rates provides users of financial statements with information that allows them to evaluate the accounting policies applied by the entity and compare them with other entities. For similar reasons, the entity must present information on:
(a) Depreciation recognized in surplus or deficit during the period or recognized in the cost of other assets during the period; and
(b) Accumulated depreciation value at the end of the period.
68. The entity must disclose information regarding the nature and impact of changes in accounting estimates affecting the current period or expected to affect future periods. In this case, for real estate, plant and equipment, the entity must disclose information when changes in estimates relate to:
(a) Recoverable liquidation value;
(b) Estimated costs for dismantling, relocating or restoring the property, factory and equipment;
(c) Useful time; and
(d) Depreciation method.
69. Entities are encouraged to submit additional information, as users of financial statements may require the following:
(a) The value of temporary properties, factories and equipment that are not in use;
(b) The value of real estate, factories and equipment that have been fully depreciated but are still in use;
(c) The value of real estate, factories and equipment that are no longer in use and are awaiting liquidation.
Reference table of paragraphs of Vietnamese public sector accounting standards compared with paragraphs of international public sector accounting standards.
|
VPSAS number 17 |
IPSAS number 17 |
|
VPSAS number 17 |
IPSAS number 17 |
|
1 |
1 |
|
36 |
41 |
|
2 |
2 |
|
37 |
43 |
|
3 |
5 |
|
38 |
59 |
|
4 |
6 |
|
39 |
60 |
|
5 |
7 |
|
40 |
61 |
|
stink |
8 |
|
41 |
62 |
|
7 |
9 |
|
42 |
63 |
|
8 |
10 |
|
43 |
64 |
|
9 |
11 |
|
44 |
65 |
|
10 |
12 |
|
45 |
66 |
|
11 |
13 |
|
46 |
67 |
|
12 |
14 |
|
47 |
68 |
|
13 |
17 |
|
48 |
69 |
|
14 |
18 |
|
49 |
70 |
|
15 |
19 |
|
50 |
71 |
|
16 |
21 |
|
51 |
72 |
|
17 |
22 |
|
52 |
73 |
|
18 |
23 |
|
53 |
74 |
|
19 |
24 |
|
54 |
76 |
|
20 |
25 |
|
55 |
77 |
|
21 |
26 |
|
56 |
78 |
|
22 |
27 |
|
57 |
78A |
|
23 |
28 |
|
58 |
82 |
|
24 |
30 |
|
59 |
83 |
|
25 |
31 |
|
60 |
83A |
|
26 |
32 |
|
61 |
84 |
|
27 |
33 |
|
62 |
85 |
|
28 |
34 |
|
63 |
86 |
|
29 |
35 |
|
64 |
87 |
|
30 |
36 |
|
65 |
88 |
|
31 |
36A |
|
66 |
89 |
|
32 |
37 |
|
67 |
90 |
|
33 |
38 |
|
68 |
91 |
|
34 |
39 |
|
69 |
94 |
|
35 |
40 |
|
|
|