CIRCULAR

ACCOUNTING FOR SMALL AND MEDIUM ENTERPRISES

Pursuant to the Law on Accounting No. 88/2015/QH13 dated November 20, 2015;

Pursuant to the Government's Decree No. 215/2013/ND-CP dated December 23, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Finance;

At the request of Director of Department of Audit and Accounting,

The Minister of Finance promulgates a Circular on accounting for small and medium enterprises

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Circular provides instructions on bookkeeping, preparation of financial statements of small and medium enterprises (SME) and does not apply to determination of enterprises’ tax liability.

Article 2. Regulated entities

1. This Circular apply to SME, including extra-small enterprises, in every field and every economic sector defined by law on assistance for SME, except for state-owned enterprises, enterprises over 50% charter capital of which are held by the State, public companies defined by securities laws, cooperatives and cooperative associations defied by the Law on Cooperatives.

2. SME in special fields such as electricity, petroleum, insurance, securities, etc. whose special accounting policies are promulgated or approved by the Ministry of Finance.

Article 3. General rules

1. SME may apply the accounting policies specified in Circular No. 200/2014/TT-BTC dated December 22, 2014 of the Ministry of Finance and amendments thereto as long as their supervisory tax authorities are informed and such accounting policies are applied consistently throughout the fiscal year. A SME that wishes to turn back to applying the accounting policies specified this Circular must do it in the beginning of the fiscal year and inform its supervisory tax authority.

2. SME shall, pursuant to accounting rules and contents of the balance sheet specified in this Circular, record their transactions in a way that is appropriate for their operation and management requirements.

3. In the cases where an enterprise undergoes changes in a fiscal year and is no longer regulated by this Circular, it may apply this Circular until the end of the current fiscal year and apply an appropriate accounting policy from the succeeding fiscal year.

Article 4. Application of accounting standards

SME shall apply the accounting policy specified in this Circular and relevant Vietnam’s accounting standards, except:

Article 5. Accounting currency

The accounting currency is Vietnamese Dong (national symbol: “đ”; international symbol: “VND”) shall be used to prepare the accounting books and financial statements of enterprises. In the cases where most of an accounting unit’s revenues and expenses are foreign currencies and the standards specified in Article 6 of this Circular are met, one of the foreign currencies may be used as accounting currency.

Article 6. Selection of accounting currency

1. An enterprise whose revenues and expenses are primarily in foreign currencies may decide on an accounting currency pursuant to the Law on Accounting and take legal responsibility for such selection. The supervisory tax authority of such enterprise must be informed of this decision.

2. An accounting currency:

a) is primarily used in the unit’s goods sale and/or service provision; greatly affects the prices for goods and/or services; is usually the currency of selling prices and payments therefor; and

b) is primarily used in the unit’s purchases of goods and/or services; greatly affects the costs of labour, materials and other operating expenses; is usually the currency of payments for such costs.

3. The following factors are also taken into account and used as evidence for the unit’s accounting currency:

a) The currencies for raising financial resources (such as issuance of shares, bonds);

b) The currencies obtained from business operations and accrued.

4. The accounting currency reflects the transactions, events and conditions related to the unit’s operation. Once determined, the accounting unit must not be changed unless in the case of vital change to such transactions, events and conditions.

Article 7. Conversion of financial statements into VND

1. In the cases where an enterprise uses a currency other than VND as its accounting currency, the currency in the financial statement that is published and submitted to Vietnamese competent authorities must be VND. If the enterprise has to have its financial statement audited, the financial statement submitted to the regulatory body and published must undergo audit.

2. The conversion of financial statement currencies into VND is specified in Article 78 of this Circular.

3. When converting the currency of a financial statement into VND, the enterprise must specify the impacts (if any) to the financial statement because of such conversion in the notes to the financial statement.

Article 8. Change of accounting currency

In case of major changes to the management and business operation that render the current accounting currency unable to meet the standards specified in Clause 2 and Clause 3 of Article 6 hereof, the enterprise may change its accounting currency. The accounting currency may only be changed at the beginning of a new accounting period.

The enterprise must inform its supervisory tax authority of the change of its accounting currency within 30 working days from the day on which such change is made.

Article 9. Rights and responsibility of enterprises to the bookkeeping of its affiliated units.

1. The enterprise shall organize the accounting apparatus of its affiliated units without legal status (hereinafter referred to as affiliated units) in a way that is appropriate for its operation and conformable with law.

2. The enterprise shall decide whether an affiliated unit keeps separate accounts of the following:

a) Regarding capital provided by the enterprise: the enterprise shall decide whether it is recorded as a liability or equity;

b) Regarding purchases, sales, internal circulation of products, goods and/or services, the enterprise shall decide the recording of revenues, costs at each affiliated unit, regardless of the form of accounting documents (internally circulated vouchers or invoices)

In the cases where the internal circulation of goods/services creates value added to the products, goods and/or services, the enterprise should record the revenues and costs at its affiliated units.

c) Depending on the accounting model, the enterprise may authorize its affiliated units to record undistributed after-tax profit or only record revenues and expenses.

Article 10. Registration of changes to accounting policy

1. Regarding the balance sheet:

a) In the cases where an enterprise wishes to add a sub-account or change the name, symbol, contents, transaction accounting method of a sub-account, it must obtain a written approval by the Ministry of Finance.

b) An enterprise may add sub-accounts account to accounts without sub-accounts specified in the Enterprise Account System in Appendix 1 enclosed herewith without approval by the Ministry of Finance.

2. Regarding financial statements:

a) An SME shall prepare its financial statement using the template in Appendix 2 enclosed herewith in a way that is appropriate for its business operation.

b) Addition or change to any item of the financial statement is subject to written approval by the Ministry of Finance.

3. Regarding accounting books and accounting documents:

a) Each enterprise may design its own accounting documents that are suitable for its operation as long as primary content and compulsory information specified by technical defects and its instructional documents are sufficient.

b) All accounting book templates (including logs and ledgers) are instructional (not mandatory). Enterprises shall comply with the Law on Accounting and instructional documents thereof. Enterprises may design their own accounting books and tags as long as information is sufficient, clear and easy to inspect.