Vietnamese Public Sector Accounting Standard No. 31 “Intangible Assets” according to Decision 1676/QD-BTC dated September 1, 2021

APPENDIX NO. 05

VIETNAMESE PUBLIC ACCOUNTING STANDARD NO. 31 INTANGIBLE ASSETS
(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. 31Intangible assets"This document is drafted based on International Public Sector Accounting Standard (IPSAS) No. 31"Intangible assets" and current regulations on Vietnam's financial and budgetary mechanisms. Vietnamese Public Sector Accounting Standard No. 31 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. 31 does not stipulate provisions of International Public Sector Accounting Standard No. 31 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 31 is the basis of the 2010 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. 31 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. 31 is included with this standard. For content relating to other public sector accounting standards, Vietnamese Public Sector Accounting Standard No. 31 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 Public Sector Accounting Standard No. 31 (2021), the following related standards had not yet been issued:

STT	Name of public accounting standard	The section contains referenced content.
1	Financial tools: Presentation	3(b); 4(d)
2	Construction contract	4 (a)
3	Property leasing	4(b); 7; 96; 97
4	Employee benefits	4(c); 35(a); 63(b)
5	Franchise Agreement: Franchisor	4 (e)
6	Separate financial statements	(D)
7	Consolidated financial statements	4 (d)
8	Investing in affiliated and joint venture entities.	4 (d)
9	Borrowing costs	39; 63
10	Accounting policies, changes in accounting estimates, and errors.	88; 94; 103
11	Revenue from exchange transactions	97; 99

 

VPSAS 31 – INTANGIBLE ASSETS

The process of issuing and updating Vietnamese Public Sector Accounting Standard No. 31
(hereinafter referred to as the Standard)

Version 31 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. 17: Property, Plant and Equipment.

 

VP SAS 31 – INTANGIBLE ASSETS
CONTENT

The content of Vietnamese Public Sector Accounting Standard No. 31 "Intangible Assets" is presented from paragraph 1 to paragraph 108. All paragraphs are equally valid.

Paragraph

I. GENERAL PROVISIONS Purpose Limit Intangible heritage Definitions Intangible assets The possibility of being identified Asset control Future economic benefits or potential services II. SPECIFIC REGULATIONS Record and determine value Purchase of separate property Costs incurred after acquiring a project that is currently under research and development. Intangible assets are acquired through non-exchange transactions. Exchange of assets Internal competitive advantage Intangible assets created internally within the organization. Research phase Implementation phase The original cost of internally generated intangible assets. Record the cost Previous expenses are not recognized as assets. Determine the value after initial recording at cost. Useful usage time Intangible assets have a limited useful life. Depreciation period and method Recoverable liquidation value Review the depreciation period and method. Intangible assets have an indefinite useful life. Consider reassessing the useful life. Termination of use and disposal Presenting information Regulations Research and development costs Other information Application instructions

1-23 1 2-13 9-13 14-23 15-23 16-18 19-22 23 24-108 24-64 32-39 40-41 42-43 44-45 46-48 52-54 55-61 62-64 65-69 69 70 71-79 80-92 80-85 86-89 90-92 93-94 94 95-100 101-108 101-105 106-107 108

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 method for intangible assets not specifically addressed in other Vietnamese public sector accounting standards. This standard stipulates that entities must recognize intangible assets only when certain specific criteria are met. This standard also specifies how to determine the value of intangible assets and the specific requirements for presenting information on intangible assets.

Limit

2. Entities that prepare and present financial statements on an accrual accounting basis shall apply this standard to the accounting of intangible assets.

3. This standard applies to the accounting of intangible assets, except for:

(a) Intangible assets fall within the scope of a different standard;

(b) Financial assets;

(c) Methods for recording and determining the value of assets arising from the exploration and evaluation of mineral resources;

(d) Costs of developing and exploiting minerals, oil, natural gas and similar non-renewable resources;

(e) Powers and rights granted by law, constitution or similar legal instruments;

(f) Deferred income tax assets;

(g) For intangible heritage. However, the information presentation requirements from paragraphs 101 to 108 apply to recognized heritage.

4. If another Vietnamese public accounting standard specifies an accounting method for a particular type of intangible asset, the entity should apply that Vietnamese public accounting standard instead of this one. For example, this standard does not apply to:

(a) Intangible assets held by the entity for sale in a normal operating cycle (see Vietnamese Public Sector Accounting Standard on Construction Contracts, and Vietnamese Public Sector Accounting Standard No. 12 “Inventory");

(b) Leased assets fall within the scope of Vietnamese public sector accounting standards on leasing;

(c) Assets arising from employee benefits (see Vietnamese public sector accounting standards on employee benefits);

(d) Financial assets as defined in the Vietnamese Public Sector Accounting Standard on Financial Instruments: Presentation. The recognition and valuation of certain financial assets are referred to in the Vietnamese Public Sector Accounting Standard on separate financial statements, consolidated financial statements, investments in associates and joint ventures; and

(e) The recognition and initial valuation of franchised assets falls within the scope of the Vietnamese Public Sector Accounting Standard on Franchising Agreements: Franchisor. However, this standard applies to the determination of post-recognition valuation and presentation of information on such assets.

5. Some intangible assets may be contained in or on a physical entity, for example, CDs (in the case of computer software), legal documents (in the case of licenses or patents), or films. To determine whether an asset includes both intangible and tangible elements, it must be accounted for according to Vietnamese Public Sector Accounting Standard No. 17.Real estate, factory and equipment"Or, when accounting for intangible assets according to this standard, the entity needs to conduct an assessment to consider which factors are more important. For example, aircraft control software is an integral part of the aircraft and is accounted for as real estate, factory, and equipment. A similar accounting method applies to computer control software systems. When the software is not an integral part of the related hardware, the computer software is accounted for as an intangible asset."

6. This standard applies to advertising, training, initiation, research, and development expenses. Research and development activities aim to develop knowledge. Therefore, although these activities may create a tangible asset (e.g., a prototype), the physical element of that asset plays only a secondary role compared to the intangible component, which is the knowledge contained within that asset.

7. In the case of finance leases, the underlying asset may be intangible or tangible. After initial recognition, the lessee must account for intangible assets in the finance lease contract in accordance with this standard. Licensing rights for assets such as films, video tapes, plays, scripts, patents, and copyrights fall within the scope of this standard.

8. Cases outside the scope of this standard may arise if the activity or transaction is so unique that it gives rise to accounting requirements that need to be handled differently.

Intangible heritage

9. This standard does not require an entity to recognize intangible assets even if they meet the definition and criteria for recognition of intangible assets. If an entity recognizes intangible assets, it must apply the information presentation provisions of this standard and may, but is not required, apply the valuation provisions of this standard.

10. Certain intangible assets are considered heritage due to their cultural, environmental, or historical value. Examples of intangible heritage include records of significant historical events and the right to use the image of a prominent figure on postage stamps or commemorative currency. Intangible heritage often exhibits certain characteristics, including the main ones listed below:

(a) The cultural, environmental and historical value of these properties cannot be fully reflected in their financial value determined purely on the basis of market price;

(b) Laws prohibit or severely restrict the sale of these properties;

(c) The value of the asset may increase over time; and

(d) It is difficult to estimate the useful life of these assets, which in some cases can be up to several hundred years.

11. Entities in the public sector may hold large amounts of intangible assets acquired over the years and through various means, including acquisition, gifts, inheritance, and confiscation. These assets are rarely held for economic purposes and may have social or legal barriers to their use for economic purposes.

12. Some intangible assets, in addition to their intrinsic value, also possess future economic benefits or potential services, for example, royalties paid to entities for the use of historical records. In these cases, the intangible asset may be recognized and valued on the same basis as other intangible assets capable of generating revenue. For other intangible assets, the value of future economic benefits or potential services is limited by their inherent characteristics. The existence of both future economic benefits and potential services may influence the choice of valuation basis.

13. The information disclosure requirements in paragraphs 101 through 105 require entities to disclose information about recognized intangible assets. Therefore, entities recognizing intangible assets 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

14. The terms in this standard are understood as follows:

The residual value is the value of an asset recorded after deducting accumulated depreciation.

Depreciation is the systematic allocation of the depreciable value of an intangible asset over its useful life.

Research is the initial and planned activity undertaken to gain new scientific or technical understanding and knowledge.

Intangible assets are non-monetary assets that can be identified but do not have a physical form.

Implementation is the process of applying research findings or knowledge to a plan or design to create new or fundamentally improved materials, equipment, products, processes, systems, or services before production or use begins.

Terms defined in other Vietnamese public sector accounting standards used in this standard have the same meaning as in those standards.

Intangible assets

15. Entities often spend resources, or borrow, to acquire, develop, maintain, or enhance intangible resources such as technological or scientific knowledge, design and implementation of new processes and systems, licenses, intellectual property rights, and trademarks (including trademarks and publication titles). Common examples of these items include computer software, patents, copyrights, films, lists of service users, granted fishing permits, granted import quotas, and relationships with service users.

The possibility of being identified

16. Not all items described in paragraph 15 meet the definition of an intangible asset, namely the identifiable ability to control a resource and the existence of potential future economic benefits or services. If an item within the scope of this standard does not meet the definition of an intangible asset, the costs incurred to acquire or create that item must be recognized as an expense at the time it is incurred.

17. Intangible assets can be identified if they:

(a) Separable, meaning that the asset can be divided or detached from the entity and sold, transferred, licensed, leased or exchanged separately or in combination with a contract, a defined asset or a related liability, regardless of whether the entity intends to do so; or

(b) Arising from binding agreements (including contractual or other legal rights), whether such rights are transferable or separable from the unit or separate from other rights and obligations.

18. For the purposes of this standard, a binding agreement is an agreement in which the parties are granted rights and obligations similar to those in the form of a contract.

Asset control

19. An entity controls an asset if it has the right to obtain future economic benefits or potential services derived from the asset and restricts other entities' access to those potential benefits or services. An entity's ability to control future economic benefits or potential services from an intangible asset typically stems from legally recognized rights. Demonstrating control is more difficult in the absence of legal rights. However, the ability to enforce rights under the law is not a necessary condition for control, as the entity may control future economic benefits or potential services in other ways.

20. Scientific and technical knowledge can provide future economic benefits or potential services. An entity controls such benefits or services when there are legal constraints, such as copyright protection, restrictions on commercial agreements (if permitted), or the legal obligation of employees to maintain confidentiality.

21. An entity may possess a skilled workforce and may determine that enhancing the workforce's skills through training will yield future economic benefits or potential services. The entity may also expect that the employees will continue to contribute those skills to the entity. However, the entity often lacks the control over the future economic benefits or potential services provided by the skilled workforce or by the training to satisfy the definition of an intangible asset. Similarly, leadership talent or technical expertise do not satisfy the definition of an intangible asset unless the asset is secured by a legal right to use or derive future economic benefits or potential services from the asset, and also satisfies other criteria in the definition.

22. An entity may possess a customer list or a successful customer acquisition rate and expect that, through its efforts in building relationships with customers, those customers will continue to use its services. However, if the entity lacks the legal right or other means to control the customer relationship or customer loyalty, it often lacks sufficient control over the future economic benefits or potential service from the customer relationship and loyalty (e.g., customer list, market share or service success rate, customer relationships and customer loyalty) to satisfy the definition of an intangible asset. In the absence of legal protection for these relationships, non-contractual exchanges based on similar or identical customer relationships may demonstrate that the entity retains control over future economic benefits or potential services arising from the customer relationship. Because these exchanges also provide evidence that the customer relationship is separable, they meet the definition of intangible assets.

Future economic benefits or potential services

23. Future economic benefits or potential services provided by an intangible asset may include revenue from the sale of products or services, cost savings, and other benefits arising from the use of the entity's asset. For example, the use of intellectual property rights in the production or provision of services may save future production or service costs, improving service delivery rather than increasing future revenue (online registration allows citizens to renew their driver's licenses faster, leading to reduced staffing costs for this function and speeding up processing).

II. SPECIFIC REGULATIONS

Record and determine value

24. Recognizing an item as an intangible asset requires the entity to demonstrate that the item meets the following criteria:

(a) Definition of intangible assets (see paragraphs 15-23); and

(b) Criteria for asset recognition (see paragraphs 27-29).

This provision applies to the original cost of an asset as determined at the time of recognition (original cost in an exchange transaction or the original cost of an internally generated intangible asset, or the fair value of an intangible asset acquired through a non-exchange transaction) and any subsequent costs incurred to supplement, replace, or service it.

25. Paragraphs 32 through 39 govern the application of recognition conditions to separately acquired intangible assets. Paragraphs 42-43 govern the determination of the initial value of intangible assets acquired through non-exchange transactions, paragraphs 44-45 govern the exchange of intangible assets, and paragraphs 46 through 48 govern the recognition of goodwill generated internally within the entity. Paragraphs 49 through 64 govern the initial recognition and valuation of internally generated intangible assets.

26. In many cases, intangible assets are of a non-replaceable or irreplaceable nature. Therefore, most post-recognition costs of intangible assets are typically intended to maintain future economic benefits or potential services associated with the asset, rather than to meet the definition of intangible assets and recognition criteria in this standard. Furthermore, directly calculating post-recognition costs for a specific intangible asset is often more difficult than calculating them for the entire operation of the entity. Consequently, it is rare for post-recognition costs of an internally acquired or created intangible asset to be recognized in the asset's value. As required by paragraph 60, subsequent expenses for trademarks, newspaper labels, publication titles, customer lists, and similar items (whether purchased externally or created internally) are always recognized as surpluses or deficits in the period in which they arise. This is because these expenses cannot be distinguished from other expenses in the entity's operations.

27. An intangible asset is recognized 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.

28. The entity shall assess the likelihood of obtaining future economic benefits or potential services from the asset by using reasonable and well-founded assumptions that represent the entity’s best estimate of the economic conditions that will exist throughout the useful life of the asset.

29. The entity shall use judgment to assess the degree of certainty of obtaining future economic benefits or potential services from the use of the asset on the basis of the evidence available at the time of initial recognition, in which external evidence is more important.

30. An intangible asset is initially valued at its original cost in accordance with the provisions of paragraphs 32 to 43. In the case of an asset acquired through a non-exchange transaction, the original cost at the time of acquisition is determined by its fair value at the date of acquisition.

31. Land use rights are intangible assets whose value is determined according to state regulations; the recording and presentation of information shall comply with the provisions of this standard.

Purchase of separate property

32. Generally, the price paid by an entity to acquire a separate intangible asset will reflect expectations about its ability to obtain future economic benefits or potential services from that asset. Thus, the entity expects to obtain future economic benefits or potential services, even if uncertain about the timing and value of those benefits. Therefore, the certainty criterion in paragraph 27(a) must be satisfied when acquiring an intangible asset separately.

33. In addition, the cost of a separately purchased asset is usually reliably determined, especially when the asset is purchased with cash or other monetary assets.

34. The initial cost of a separately purchased asset includes:

(a) The purchase price of the asset, including import duties and taxes on the purchase that are not refundable or deductible, after deducting any discounts and trade rebates; and

(b) Costs directly related to preparing the asset for use as intended by the entity.

35. Some examples of direct costs associated with intangible assets:

(a) Labor costs incurred directly in connection with bringing the asset into a ready-to-operate condition;

(b) Expert fees incurred directly in connection with bringing the asset to a ready-to-operate condition; and

(c) Costs of testing to check whether the asset is functioning properly.

36. Some examples of expenses not included in the cost of an intangible asset:

(a) Costs of introducing a new product or service (including costs for advertising and promotional activities);

(b) Costs of expanding business operations to a new location with a new customer segment (including employee training costs); and

(c) Administrative and other general expenses.

37. The recognition of costs in the cost of an intangible asset must cease when the asset is in a state where it is ready to operate as intended by the entity. Therefore, costs incurred during the use or re-exploitation of the asset are not included in its cost. For example, the following costs are not included in the cost of an intangible asset:

(a) Costs incurred when an asset is capable of operating as intended by the entity but has not yet been put into use; and

(b) Initial operating losses, for example, losses incurred during the product planning phase of an asset.

38. Certain activities arise in connection with the deployment of intangible assets, but do not necessarily bring those assets to a state of operational readiness as intended by the entity. These activities may arise before or during the deployment of the asset. Since these activities do not necessarily bring an asset to an operational state, the revenue and related expenses of these activities are recognized as revenue and expenses in the period.

39. If an asset is paid for on deferred payment terms, the asset's cost is the cash equivalent of its purchase price if paid immediately. 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's value in accordance with the accepted capitalization method as prescribed in the Vietnamese Public Sector Accounting Standard on Borrowing Costs.

Costs incurred after acquiring a project that is currently under research and development.

40. The following research or development costs shall be accounted for in accordance with the provisions of paragraphs 52-59:

(a) In connection with a project under study or development that is acquired separately and recognized as an intangible asset;

(b) Arising after the date of acquisition of that project;

41. The application of the provisions in paragraphs 52-59 means that subsequent costs incurred by a project in the research or development phase, purchased separately and recognized as an intangible asset, shall:

(a) Recognized as an expense at the time it is incurred if it is a research expense;

(b) Recognized as an expense at the time it is incurred if it is a development expense that does not meet the criteria for recognizing intangible assets under paragraph 55; and

(c) Included in the cost of the project during the acquired research or development phase if the development costs meet the criteria for recognition as intangible assets under paragraph 55.

Intangible assets are acquired through non-exchange transactions.

42. In some cases, intangible assets may be acquired through non-exchange transactions. This may occur when an entity is transferred intangible assets in a non-exchange transaction, for example, airport landing rights, radio or television broadcasting station operating licenses, import licenses, or access to other restricted resources. Citizens, as individuals, may bequeath their personal documents, including copyrights to their publications, to a national archive (a public sector entity) in a non-exchange transaction.

43. In these cases, the original cost of the asset is its fair value on the date of acquisition.

Exchange of assets

44. An entity may acquire one or more intangible assets through exchange with one or more non-monetary assets or a combination of both monetary and non-monetary assets. The provision below only refers to the exchange of one non-monetary asset for another, but also applies to all exchange transactions mentioned above. The cost of the received intangible asset is its fair value unless the fair value of the received asset and the asset exchanged cannot be reliably determined. The cost of the received asset is determined in this way even if the entity cannot immediately write down the asset exchanged. If the cost of the received asset cannot be determined at its fair value, it must be determined at the remaining book value of the asset exchanged.

45. According to paragraph 27(b), one of the conditions for recognizing an intangible asset is that its cost can be reliably determined. The fair value of an intangible asset in the absence of comparable market transactions for that asset can be reliably determined if:

(a) Estimates of the fair value of that asset do not differ significantly; or

(b) The likelihood of different estimates occurring can be assessed and used appropriately to estimate the fair value.

If the entity is able to reliably determine the fair value of the asset received or the asset 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.

Internal competitive advantage

46. ​​Goodwill generated internally within an entity is not recognized as an asset.

47. In some cases, certain expenses are incurred to create future economic benefits or potential services, but do not constitute an intangible asset that meets the recognition criteria in this standard. These expenses are generally considered to contribute to the creation of goodwill from within the entity. Goodwill created from within the entity is not recognized as an asset because it is not an identifiable, separable resource, nor does it arise from binding agreements (including contractual or other legal rights) controlled by the entity and whose cost can be reliably determined.

48. The difference between the market value of an entity and the book value of its identifiable net assets at any given time may encompass a range of factors influencing the entity's value. However, these differences do not reflect the original cost of intangible assets controlled by the entity.

Intangible assets created internally within the organization.

49. Several issues make it difficult to assess whether an internally generated intangible asset meets the recognition criteria:

(a) It is difficult to determine whether a particular asset will generate future economic benefits or potential services and when those future economic benefits or potential services might be generated; and

(b) It is difficult to reliably determine the original cost of an asset. In some cases, the cost of creating an intangible asset internally cannot be separated from the cost of maintaining or enhancing internal goodwill or of maintaining the unit's day-to-day operations.

Therefore, in addition to complying with general regulations regarding the recognition and initial valuation of an intangible asset, the entity must apply the requirements and guidance in paragraphs 50 through 64 to all internally generated intangible assets.

50. To assess whether an internally generated intangible asset meets the recognition criteria, the entity must classify the asset formation process into the following stages:

(a) Research phase; and

(b) Implementation phase.

The terms “research phase” and “development phase” have a broader meaning than the terms “research” and “development” for the purposes of this standard.

51. If an entity cannot separate the research and development phases of an internal project aimed at creating an intangible asset, it must account for the project's expenses in the current period as research phase expenses.

Research phase

52. Intangible assets are not recognized from research (or from the research phase of an internal project). Expenses for research (or for the research phase of an internal project) are recognized as expenses incurred in the period.

53. During the research phase of an internal project, the entity cannot demonstrate that the intangible assets existing during this phase can provide future economic benefits or potential services. Therefore, expenses incurred during this phase are recognized as expenses incurred in the period.

54. Examples of research activities include:

(a) Activities aimed at acquiring new knowledge;

(b) Searching for, evaluating, and selecting or applying findings obtained from research or other knowledge;

(c) Searching for new materials, equipment, products, processes, systems, or services; and

(d) Develop, design, evaluate, and select viable alternatives to new or improved materials, equipment, products, processes, systems, or services from existing ones.

Implementation phase

55. Intangible assets arising from the implementation (or from the implementation phase of an internal project) are recognized when and only when the entity can meet all of the following conditions:

(a) The technical feasibility of completing the intangible asset so that the asset can be ready for use or sale;

(b) The entity intends to complete the intangible asset and use or sell it;

(c) The entity has the ability to use or sell that intangible asset;

(d) How the intangible asset will generate future economic benefits or potential services. In addition, the entity can demonstrate the existence of a market for the asset or for the product created by the asset, or the internal use and usefulness of the intangible asset;

(e) Having sufficient technical, financial and other resources to complete the deployment and use or sale of that intangible asset;

(f) It is possible to reliably identify the costs that contribute to the creation of that intangible asset during the development phase.

56. During the implementation phase of an internal project, in some cases, the entity may identify an intangible asset and demonstrate that it will provide future economic benefits or potential services. This is because the implementation phase of a project is a more advanced stage than the research phase.

57. Examples of deployment activities:

(a) Designing, constructing, and testing models or prototypes before they are put into production or use.

(b) Design of tools, jigs, molds, and dyeing equipment using new technologies;

(c) Designing, constructing, and operating a pilot plant or testing facility that is not yet economically viable to scale up for commercial production or use in providing services;

(d) Design, build, and test a viable alternative solution to a new or improved material, equipment, product, process, system, or service from existing ones;

(e) Website costs and software development costs.

58. The availability of the resources necessary to complete, utilize, and benefit from an intangible asset may be demonstrated by an operational plan that indicates the technical, financial, and other resources required and the entity's ability to secure these resources. In some cases, the entity may demonstrate the availability of external financing by obtaining confirmation of the donor's or lender's willingness to finance the project.

59. An entity's cost management and tracking system can typically reliably identify the costs of creating an intangible asset internally, such as employee salaries and other expenses like logo design, licensing, or computer software development costs.

60. Trademarks, newspaper labels, publication titles, service user lists, and similar items created internally by the entity shall not be recognized as intangible assets.

61. Expenses for trademarks, newspaper labels, publication titles, service user lists, and similar items generated internally cannot be distinguished from general operating expenses of the entire entity. Therefore, these expenses should not be recognized as intangible assets.

The initial cost of an internally generated intangible asset.

62. The cost of an internally generated intangible asset as defined in paragraph 30 is the sum of all expenses incurred since the date the intangible asset meets the recognition criteria in paragraphs 27, 28, and 55. Paragraph 69 does not permit the re-recognition of previously expensed costs into the cost of an intangible asset.

63. The cost of an internally generated intangible asset includes all direct costs necessary to create, produce, and prepare the asset to operate as intended by the entity. Examples of direct costs of creating an asset include:

(a) Costs of materials and services used or consumed in the process of creating intangible assets;

(b) Labor costs arising from the creation of intangible assets;

(c) Registration fees for legal rights; and

(d) Depreciation costs of patents and licenses used to create intangible assets.

Vietnamese public sector accounting standards on borrowing costs specify the criteria for recognizing interest expense in the cost of assets.

64. The following expenses shall not be recognized in the cost of an internally generated intangible asset:

(a) Administrative, selling and other general expenses, except where such expenses are directly related to preparing the asset to be in use;

(b) Costs incurred as a result of identifiable failures or deficits in operations occurring before the asset reaches the planned level of operation; and

(c) Costs of training staff to operate the asset.

Record the cost

65. Expenses for an intangible item shall be recognized as expenses when incurred, unless such expense constitutes the cost of the intangible asset that meets the recognition criteria (see paragraphs 24-64).

66. In some cases, expenses incurred to provide future economic benefits or potential services to an entity, but no intangible or other asset acquired or created, are recognized. In the case of goods consumption, the entity recognizes the expense as an expense when it gains access to the goods. In the case of services consumption, the entity recognizes the expense as an expense when it receives the service. For example, research expenses are recognized as an expense when they are incurred (see paragraph 52). Other examples of expenses recognized as expenses when they are incurred include:

(a) Expenses for initial operations (initial costs), unless these expenses are included in the cost of real estate, plant and equipment under Vietnamese Public Sector Accounting Standard No. 17. Initial costs may include establishment costs such as attorney fees, administrative costs incurred in the establishment of the entity, costs of opening a new facility or a new operation (pre-establishment costs), or costs of starting a new operation or introducing a new product or process (pre-operational costs);

(b) Costs for training activities;

(c) Expenses for advertising and promotional activities (including the cost of mailing leaflets and brochures); and

(d) Costs of relocating or restructuring part or all of the unit.

67. An entity has the right of access to goods when it possesses them. Similarly, an entity has the right of access to goods when the goods are manufactured by the supplier in accordance with the terms of the contract and the entity has the right to demand delivery upon payment. Services are considered acquired when they are performed by the supplier providing them to the entity under a service contract, not when the entity uses those services to provide other services, for example, to provide information about the services to users of the services.

68. Paragraph 65 does not prohibit an entity from recognizing a prepayment as an asset when the payment is made before the entity has access to the goods. Similarly, paragraph 65 does not prohibit an entity from recognizing a prepayment as an asset when the payment is made before the entity receives the services.

Previous expenses are not recognized as assets.

69. An expense for an intangible item that has been initially recognized as an expense under this standard shall not be re-recognized as an expense of the intangible asset at a later date.

Determine the value after initial recording at cost.

70. Once recognized, an intangible asset is reflected at its original cost less accumulated depreciation.

Useful usage time

71. The entity must assess whether the useful life of an intangible asset is finite or indefinite. If the useful life of an intangible asset is finite, the length of time, or the quantity of products or similar units of measurement of that useful life, must be assessed. An intangible asset is considered to have an indefinite useful life when, based on an analysis of all relevant factors, there is no predictable limit to the period during which the asset is expected to generate cash inflows or provide potential services to the entity.

72. Accounting for intangible assets is based on the useful life of the asset. Intangible assets with a finite useful life are depreciated (see paragraphs 80-92), and intangible assets with an indefinite useful life are not depreciated (see paragraphs 93, 94).

73. Factors influencing the determination of the useful life of an intangible asset include:

(a) The expected level of asset utilization by the unit and whether that asset will be managed effectively by a different management team;

(b) The characteristic product life cycle of the asset and information on estimated useful life of similar assets used in a similar manner;

(c) Technical, technological, commercial or other backwardness;

(d) The stability of the asset's operating sector and changes in market demand for the asset's outputs or services;

(e) Planned activities of current or potential competitors;

(f) The level of maintenance costs required to obtain the expected future economic benefits or potential services from the asset and the entity's ability and intention to cover these costs;

(g) The period of control over the property, legal or similar restrictions on the use of the property, for example, the term of termination of the relevant lease; and

(h) The dependence of the useful life of an asset on the useful life of other assets within the unit.

74. The term “indefinite useful life” does not mean “indefinite.” The useful life of an intangible asset reflects only the maintenance costs necessary to keep the asset in standard operating condition as assessed at the time of estimating the asset’s useful life and the entity’s ability and intention to pay these costs. The conclusion that the useful life of an intangible asset is indefinite should not depend on anticipated future costs exceeding those necessary to keep the asset in standard operating condition.

75. Due to rapid technological change, computer software and many other intangible assets easily become obsolete. Consequently, these assets typically have a short useful life. A decline in the expected future selling price of a product produced by an intangible asset is an indication of technological or commercial obsolescence of the asset, and thus may reflect a decline in future economic benefits or potential services derived from the asset.

76. The useful life of an intangible asset can be very long, or even indeterminate. Uncertainty allows the useful life of an intangible asset to be estimated on a conservative basis, but this does not permit the selection of an unrealistically short useful life.

77. The useful life of an intangible asset arising from binding agreements (including contractual or other legal rights) shall not exceed the term of the agreement but may be shorter, depending on the duration the entity intends to use the asset. If the binding agreement is term-limited and renewable, the useful life of the intangible asset shall only include the extension period under the contract if there is evidence that the extension is certain for the entity and would not incur significant costs.

78. Economic, political, social, and legal factors can influence the useful life of intangible assets. Economic, political, and social factors determine the period during which an entity can obtain future economic benefits or potential services. Legal factors may limit the period during which an entity has control over those future economic benefits or potential services. The useful life is the shortest period determined by these factors.

79. The following factors enable the entity to renew binding agreements (including contractual or other legal rights) without incurring significant costs:

(a) There is evidence, possibly based on experience, that the binding agreements (including contractual or other legal rights) will be renewed. If the renewal depends on the consent of a third party, there must be evidence that the third party will agree to the renewal;

(b) There is evidence that all the necessary conditions for renewal will be met; and

(c) The unit's cost of renewal is negligible compared to the future economic benefits or potential services the unit expects to obtain from the renewal.

If the renewal cost is substantial compared to the future economic benefits or potential services the entity expects to receive from the renewal, then the renewal cost is essentially the cost of purchasing a new intangible asset at the renewal date.

Intangible assets have a limited useful life.

Depreciation period and method

80. The depreciable value of intangible assets with a finite useful life must be systematically allocated over the asset's useful life. Depreciation begins when the asset is ready for use, that is, when it is in the location and condition necessary to operate as intended by the entity. Depreciation ends on the date the asset is written off. The depreciation method must reflect how the entity anticipates using the future economic benefits or potential services from the asset. If this cannot be reliably determined, the entity should apply the straight-line depreciation method. Depreciation expense incurred in each period must be recognized in the surplus or deficit of that period, unless this or other standards permit or stipulate that depreciation expense be included in the value of another asset.

81. 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. The depreciation method applied is chosen based on how future economic benefits or potential services are obtained from the use of the asset and is applied consistently across periods, unless there is a change in how the entity obtains future economic benefits or potential services.

82. There is a disproven assumption that depreciation methods based on revenue generated from activities using intangible assets are inappropriate. Revenue generated from activities using intangible assets typically reflects factors other than the direct recovery of potential economic or service benefits from the intangible asset. For example, revenue is affected by inputs and processes, sales activities and changes in sales volume and selling prices. The price component of revenue may be affected by inflation, which is unrelated to how the asset is used. This assumption may only be acceptable in a limited number of cases such as:

(a) Intangible assets are presented as a measure of the value of revenue, as described in paragraph 84; or

(b) It can be demonstrated that revenue and the acquisition of potential economic or service benefits from intangible assets are highly correlated.

83. When selecting an appropriate depreciation method in accordance with paragraph 81, an entity may identify the most readily apparent limiting factor inherent in an intangible asset. For example, a contract may provide for the entity's right to use an intangible asset for a predetermined period, for a certain number of units produced, or for a fixed total revenue generated. Identifying the most readily apparent limiting factor may be the starting point for determining an appropriate depreciation basis, but a different basis may be applied if it more closely reflects how the potential economic or service benefits are expected to be obtained.

84. In cases where the most readily apparent limiting factor inherent in an intangible asset is a certain level of revenue, the revenue generated may serve as the appropriate basis for depreciation. For example, the right to operate a toll road may be based on a fixed total revenue generated from cumulative toll fees (the contract may allow the operation of the toll road until the cumulative toll revenue reaches VND 20.000 trillion). In cases where revenue is the most readily apparent limiting factor in a contract for the use of an intangible asset, the revenue generated may serve as the appropriate basis for depreciating the intangible asset, provided the contract specifies the value of the fixed total revenue from which depreciation is determined.

85. 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 value of another asset and is included in the value of that asset. For example, depreciation of an intangible asset used in the production process is included in the value of inventory (see Vietnamese Public Sector Accounting Standard No. 12).

Recoverable liquidation value

86. The recoverable liquidation value of an intangible asset with a finite useful life is considered to be zero, unless:

(a) There is a third-party commitment to repurchase the asset after its useful life has ended; or

(b) There exists an active market for that asset, and:

(i) The liquidation value can be determined by reference to this market; and

(ii) It is likely that this market will exist at the end of the asset's useful life.

87. The depreciable value of an asset with a finite useful life is determined after subtracting its recoverable salvage value. A salvage value greater than 0 means that the entity intends to dispose of the intangible asset before the end of its economic life.

88. Estimates of the recoverable salvage value of an asset are based on the recoverable value from the disposal of that asset, using the available selling prices at the estimate date of similar assets that have reached the end of their useful life and are operating under similar conditions. The recoverable salvage value of an asset should be reviewed at least every reporting period. Any change in the recoverable salvage value of an asset is considered a change in the accounting estimate under Vietnamese public sector accounting standards on accounting policy, changes in accounting estimates, and errors.

89. The recoverable liquidation value of an intangible asset may increase to a level equal to or greater than its carry value. In this case, depreciation expense is zero, unless and until the recoverable liquidation value of the asset subsequently decreases to a level lower than its carry value.

Review the depreciation period and depreciation method.

90. The depreciation period and method of an intangible asset with a finite useful life must be reviewed at least every reporting period. If the estimated useful life of the asset changes from previous estimates, the depreciation period must also change accordingly. If there is a significant change in the way the entity uses the future economic benefits or potential services from the asset, the depreciation method must also change to reflect this new use. These changes are considered changes in accounting estimates under the provisions of the Vietnamese Public Sector Accounting Standard on Accounting Policy, Changes in Accounting Estimates and Errors.

91. During the lifecycle of an intangible asset, at some point it may become clear that estimates of the asset's useful life are no longer appropriate.

92. The way an entity obtains future economic benefits or potential services from an intangible asset may change over time. For example, it may be clear that applying the declining balance depreciation method is more appropriate than the straight-line depreciation method. Another example is that the use of rights granted under a license may be postponed until other activities in the entity's plan are undertaken. In this case, the entity may only obtain the potential economic benefits or services in later periods.

Intangible assets have an indefinite useful life.

93. Intangible assets with an indefinite useful life are not subject to depreciation.

Consider reassessing the useful life.

94. The useful life of an intangible asset not subject to depreciation must be reviewed at each reporting period to determine whether actual conditions are still consistent with the asset's indefinite useful life. If not, the asset's useful life must be changed from indefinite to finite and accounted for as a change in accounting estimate in accordance with the guidance in the Vietnamese Public Sector Accounting Standard on Accounting Policy, Changes in Accounting Estimates and Errors.

Termination of use and disposal

95. Intangible assets must be written down when:

(a) Liquidation of assets (including liquidation through a non-exchange transaction); or

(b) When no future economic benefits or potential services are obtained from the use or disposal of the asset.

96. Gains or losses arising from the write-off of intangible assets are determined as the difference between the net proceeds from the disposal, if any, and the remaining value of the asset. These gains or losses must be recognized in the surplus or deficit of the period in which the asset is written off (except where Vietnamese accounting standards on leasing provide otherwise regarding the sale of an asset followed by a leaseback).

97. The write-off of an intangible asset can be done in various forms (e.g., sale, finance lease, or through a non-exchange transaction). When determining the timing of the write-off, 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.

98. In accordance with the recognition principle in paragraph 27, if an entity recognizes the value of a replacement part in the cost of an intangible asset, it must write down the residual value of the replaced part. 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 purchased or created internally.

99. Receivables from the liquidation of intangible assets are initially recognized at fair value. If the asset is liquidated on deferred payment terms, the receivable is initially recognized at the cash equivalent if paid immediately. The difference between the cash purchase price and the total amount paid on deferred payment terms is recognized as interest earned in accordance with Vietnamese public sector accounting standards on revenue from exchange transactions.

100. Depreciation of intangible assets with a finite useful life does not stop when the intangible asset is not in use, unless the asset has been fully depreciated.

Presenting information

Regulations

101. The entity must present the following information for each group of intangible assets, separating intangible assets created internally by the entity from other intangible assets:

(a) Whether the useful life of the asset is finite or indefinite, if finite, the useful life or the applicable depreciation rate must be stated;

(b) Depreciation method applicable to intangible assets with a finite useful life;

(c) Original cost and accumulated depreciation at the beginning and end of the period;

(d) Items on the statement of income that include depreciation expense of intangible assets;

(e) A reconciliation table of the remaining value of assets at the beginning and end of the period, which presents the following information:

(i) Increases during the period, separating assets deployed internally within the unit and assets purchased separately;

(ii) Number of liquidated items;

(iii) Depreciation amount recorded during the period;

(iv) Net exchange rate differences arising from the conversion of financial statements to the reporting currency, and the conversion of financial statements of a foreign operating entity to the entity's reporting currency; and

(v) Other changes in the residual value of the asset during the period.

102. An intangible asset group is a collection of assets that share similar characteristics or uses in the entity's operations. Examples of asset groups might include:

(a) Trademark;

(b) Newspaper labels and publication titles;

(c) Computer software;

(d) License;

(e) Copyrights, patents, industrial and service intellectual property rights and other operating rights;

(f) Formulas, models, designs, prototypes; and

(g) Intangible assets in development.

The asset groups above can be broken down (or grouped together) into smaller (or larger) groups to provide more relevant information to users of financial statements.

103. Vietnamese Public Sector Accounting Standards on Accounting Policy, Changes in Accounting Estimates and Errors require entities to disclose information about the nature and value of a change in accounting estimates that has a material effect in the current period or is expected to have a material effect in subsequent periods. This disclosure may be required due to changes in:

(a) An estimate of the useful life of an intangible asset;

(b) Depreciation method; or

(c) Recoverable liquidation value.

104. The unit must also present the following information:

(a) For an intangible asset with an indefinite useful life, the remaining value of that asset and the reasons for valuing the asset as having an indefinite useful life. When presenting these reasons, the entity must describe the factors that are significant in determining the asset's indefinite useful life.

(b) An interpretation of any intangible assets that have a material impact on the entity's financial statements, information on the remaining value and remaining depreciation period of such assets.

(c) For intangible assets acquired through a non-exchange transaction and initially recognized at fair value (see paragraphs 42–43):

(i) The original fair value recognized of these assets; and

(ii) The remaining value of these assets.

(d) The existence and residual value of intangible assets whose ownership is restricted and the residual value of intangible assets pledged as collateral for debts.

(e) The value of commitments to purchase intangible assets.

105. When describing the factors that are important in determining an asset to have an indefinite useful life, the entity should consider the factors referred to in paragraph 73.

Research and development costs

106. The entity must present information on the total research and development costs recognized as expenses during the period.

107. Research and development expenses include all expenses directly related to the research and development activities of the entity (paragraphs 63 and 64 provide guidance on the types of research and development expenses that should be presented in accordance with the information presentation requirements of paragraph 106).

Other information

108. The unit is encouraged, but not required, to present the following information:

(a) An interpretation of intangible assets that have been fully depreciated but are still in use; and

(b) A brief explanation of significant intangible assets controlled by the entity but not recognized as assets because they do not meet the recognition criteria in this standard.

 

INSTRUCTIONS FOR APPLICATION

This guidance is an integral part of Vietnamese Public Sector Accounting Standard No. 31.

Website costs

HD1. The entity may incur internal expenses to deploy and operate its own website for internal or external access. A website designed for external access may be used for various purposes, such as disseminating information, introducing services, soliciting feedback on draft laws, promoting and advertising the entity's services and products, providing online services, and selling products and services. A website designed for internal access may be used to store policies and details about service users, and to search for related information.

HD2. The steps for deploying a website can be described as follows:

(a) Planning – including feasibility studies, defining objectives and characteristics, evaluating alternatives, and selecting priorities;

(b) Application and infrastructure development – ​​including domain name acquisition, hardware and software acquisition and development, application installation and scenario testing;

(c) Creating graphic designs, including designing the interfaces of websites; and

(d) Content creation – including the creation, purchase, preparation, and updating of text or graphic information on the website before the website is completed. This information may be stored in a separate database integrated with (or accessed from) the website or encoded directly within the website.

HD3. Once the website construction is complete, the operational phase begins. During this phase, the unit maintains and improves the applications, infrastructure, graphic design, and content of the website.

HD4. When accounting for internal costs related to the deployment and operation of the unit's website, the issues to consider are:

(a) Is that website an internally generated intangible asset in accordance with the provisions of this standard? and

(b) Appropriate accounting methods for such expenses.

HD5. This guidance does not apply to the costs of purchasing, deploying, and operating hardware (such as website servers, temporary servers, operational servers, and internet connections) for a website. These costs are accounted for according to Vietnamese Public Sector Accounting Standard No. 17. Furthermore, when an entity pays for internet services for its website, that expense is accounted for as an expense in the period in which the entity receives the service.

HD6. Vietnamese Public Sector Accounting Standard No. 31 does not apply to intangible assets held by an entity for sale in a normal operating cycle (see Vietnamese Public Sector Accounting Standard on Construction Contracts and Vietnamese Public Sector Accounting Standard No. 12) or for lease under Vietnamese Public Sector Accounting Standard on Leases. Therefore, this guidance does not apply to expenses for deploying or operating a website (or website software) for sale to another entity. If the website is subleased under an operating lease, the lessor applies this guidance. If the website is leased under a finance lease, the lessee applies this guidance after the initial recognition of the leased asset.

HD7. A website of an entity, whether deployed for internal use or accessible externally, is an internally generated intangible asset falling within the scope of this standard.

HD8. A website acquired through a development activity is considered an intangible asset if and only if the entity satisfies the requirements in paragraph 55 of this standard, in addition to complying with the general requirements in paragraph 27 regarding the recognition and determination of the initial value of assets. Specifically, the entity must demonstrate how the website will generate future economic benefits or potential services as defined in paragraph 55(d) of this standard. For example, if the website is capable of generating revenue, including direct revenue from online orders or providing services through the website without requiring a physical location or human resources. If the entity cannot demonstrate that the website's development, purely or primarily for advertising services and products, will generate future economic benefits or potential services for the entity, then all website development costs will be recognized as expenses as they arise.

HD9. All internal expenses for the deployment and operation of the entity's website shall be accounted for in accordance with the provisions of this standard. The nature of each activity that generates costs (such as staff training, website maintenance) and the deployment and post-construction phases of the website must be evaluated to determine the appropriate accounting method. For example:

(a) The planning phase is similar in nature to the research phase referred to in paragraphs 52-54 of this standard. Expenses incurred during this phase are accounted for as expenses when they are incurred.

(b) The application and infrastructure development phase, the graphic design development phase, and the content development phase, provided that the content is developed for purposes other than promoting and advertising the entity's services and products, are essentially similar to the implementation phase as defined in paragraphs 55-61 of this standard. Costs incurred during these phases are included in the cost of the website and accounted for as intangible assets under paragraph HD8, provided that these costs directly contribute to and are necessary for the creation and development of the website or for preparing the website to operate as intended by the entity. For example, expenses for purchasing or creating content (excluding advertising and promotional content for the entity's services and products) specifically for a website, and expenses for using the content (license fees for copying the content) of that website, are included in implementation costs if the conditions are met.

(c) Expenses incurred during the content development phase, provided the content is created to advertise and promote the entity's products or services (digital images of products), shall be accounted for as expenses at the time of incurrence as prescribed in paragraph 66(c) of this standard. For example, when accounting for expenses for digital product photography and image enhancement services, these should be accounted for as expenses at the time the service is received, not when the digital images are displayed on the website; and

(d) The operational phase begins as soon as the website deployment phase is completed. Expenses incurred during this phase are recognized as expenses when incurred unless they meet the recognition criteria in paragraph 27 of this standard.

HD10. A website accounted for as an intangible asset under paragraph HD8 of this Standard's Application Guidance is valued after its initial recognition by applying the provisions of paragraph 70 of this standard. As described in paragraph 76, the useful life of a website is typically estimated to be short.

HD11. The guidance in sections HD1-HD10 does not specifically apply to software deployment costs; however, the organization may also apply the principles in these sections.

 

Reference table of paragraphs of Vietnamese public sector accounting standards compared with paragraphs of international public sector accounting standards.

VPSAS number 31	IPSAS number 31		VPSAS number 31	IPSAS31 number		VPSAS number 31	IPSAS number 31
1	1		37	37		73	89
2	2		38	38		74	90
3	3		39	39		75	91
4	6		40	40		76	92
5	7		41	41		77	93
6	8		42	42		78	94
7	9		43	43		79	95
8	10		44	44		80	96
9	11		45	45		81	97
10	12		46	46		82	97A
11	13		47	47		83	97B
12	14		48	48		84	97C
13	15		49	49		85	98
14	16		50	50		86	99
15	17		51	51		87	100
16	18		52	52		88	101
17	19		53	53		89	102
18	20		54	54		90	103
19	21		55	55		91	104
20	22		56	56		92	105
21	23		57	57		93	106
22	24		58	59		94	108
23	25		59	60		95	111
24	26		60	61		96	112
25	26A		61	62		97	113
26	27		62	63		98	114
27	28		63	64		99	115
28	29		64	65		100	116
29	30		65	66		101	117
30	31		66	67		102	118
31			67	68		103	120
32	32		68	69		104	121
33	33		69	70		105	122
34	34		70	73		106	125
35	35		71	87		107	126
36	36		72	88		108	127