Thông tư 179/2012/TT-BTC

CIRCULAR

ON THE RECORDING, ASSESSMENT, AND SETTLEMENT OF THE EXCHANGE DIFFERENCES IN ENTERPRISES

- Pursuant to the Law on Enterprise 2005;

- Pursuant to the Government's Decree No. 118/2008/NĐ-CP dated November 27^th 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance ;

At the proposal of the Director of the Department of Enterprise Finance

The Minister of Finance promulgates a Circular on the recording, assessment, and settlement of the exchange differences in enterprises as follows:

Part A

GENERAL PROVISIONS

Article 1. Subjects of application and scope of regulation:

1. Subjects of application:

This Circular is applicable to the enterprise established and run in Vietnam as prescribed by law. This Circular is not applicable to the credit institutions established and run in accordance with the Law on credit institutions.

For the enterprises established on the basis of the Agreements signed between the Government of the Socialist Republic of Vietnam and other Governments that prescribe the settlement of exchange differences inconsistently with this Circular, such Agreements shall apply.

2. Scope of regulation:

This Circular guides the recording, assessment, and settlement of the exchange differences, and the conversion of the Financial statements on the overseas activities and the overseas offices of enterprises into the Vietnamese currency and accounting.

The determination of deductible expenses and incomes when calculating the income subject to enterprise income tax on the exchange differences in the enterprise must comply with the legal documents on enterprise income tax.

Article 2. Interpretation of terms

The terms in this Circular are construed as follows:

1. “Foreign currency” is a different currency from the accounting currency of an enterprise.

2. “Foreign currency transactions” are the transactions in collecting and spending foreign currencies, and used for price calculation.

3. “Exchange rates” is the exchange ratio between two currencies.

4. “Exchange differences" are the differences arising from an actual exchange or conversion of the same amount of foreign currency into the accounting currency according to various exchange rates.

5. “Accounts derived from foreign currencies" are a specific or calculable amount of existing cash, cash equivalents, receivables, and payables, comprising:

- Cash and cash equivalents in foreign currencies.

- The receivables and payables derived from foreign currencies, except for:

+ The advanced payments to sellers in foreign currencies, and the prepaid expenses in foreign currencies.

+ The received revenues in foreign currencies and the prepaid expenses in foreign currencies.

- The redeemable deposits and collateral in cash or cash equivalents in foreign currencies, the received deposits and collateral that must be returned

- The loans taken, given, or deposit in foreign currencies.

6. “Overseas activities” are branches, subsidiaries, associate companies, companies in joint-ventures, business cooperation, and other business associations of the reporting enterprise that are done in a country outside the Vietnam’s territory.

7. “Overseas office" is an overseas activity, of which the activities are independent from the reporting enterprise.

Article 3. The rates to Vietnam Dong (VND) of foreign currencies:

1. The payment of the accounts derived from foreign currencies arising in the fiscal year must be made at the actual exchange rate of the commercial bank that make transactions with the enterprise at the time of making the foreign currency transaction.

2. The foreign currency balance at the end of the accounting period shall be assessed according to the buying exchange rate, announced at the time of making the Financial statement, of the commercial bank where the enterprise opens its account.

Article 4. For the foreign currencies of which the rates to VND are not announced by the State bank of Vietnam:

1. If an enterprise opens accounts at a commercial bank that announces the exchange rates of the foreign currencies, they shall be exchanged at the transaction exchange rates of such bank at the time of reassessing the balance of the accounts derived from foreign currencies at the end of the period.

2. If an enterprise opens accounts at multiple commercial banks that announces the exchange rates of the foreign currencies, they shall be exchanged at the average exchange rates of the banks where the enterprise opens its account at the time of reassessing the balance of the accounts derived from foreign currencies at the end of the period.

3. If the commercial bank where the enterprise opens its accounts does not announce the exchange rates of the foreign currencies, they shall be exchanged at the rate of some primary foreign currencies announced by the State bank of Vietnam at the average transaction exchange rate of the banks at the time of reassessing the balance of the accounts derived from foreign currencies at the end of the period.

Part B

SPECIFIC PROVISIONS

Article 5. Settling the exchange differences during the investment in the construction of fixed assets of the new enterprise that has not commenced its operation:

During the investment in the construction of fixed assets of the new enterprise that has not commenced its operation, the exchange differences arising when paying the accounts derived from foreign currencies to make the investment the construction, and the exchange differences arising when reassessing the accounts derived from foreign currencies at the end of the fiscal year must be cumulatively and separately expressed in the Balance sheet. When the fixed assets are finished and put into use, the exchange differences arising during the construction (after offsetting the gains against the losses) shall be gradually distributed to the financial income or financial expense. The period of distribution must not exceed 5 years as from the construction comes into operation.

Article 6. Settling the exchange differences while the enterprise is operating:

During the operation, including the investment in the construction of fixed assets of the operating enterprise, the exchange differences arising from the transactions in foreign currencies of the accounts derived from foreign currencies shall be recorded into the financial income or the financial expense in the fiscal year.

Article 7. Settling the exchange differences while the enterprise is dissolved and liquidated:

While the enterprise is dissolved and liquidated, the exchange differences arising from the transactions in foreign currencies of the accounts derived from foreign currencies shall be recorded into the liquidation revenue or liquidation expenses of the enterprise.

Article 8. Settling the exchange differences arising from the reassessment of the foreign currency balance at the end of the accounting period (quarterly, biannually, annually):

1. At the end of an accounting period, the enterprise must reassess the balance of cash, deposits, transferring money, receivables, and payables derived from foreign currencies into VND at the exchange rates prescribed in Article 3 and Article 4 of this Circular. The exchange differences arising from the reassessment of the balance at the end of the period, after offsetting the gains against the losses, shall be recorded into the financial income or financial expense in the period.

2. The enterprise must not distribute its profit nor pay dividend on the exchange gains arising from the reassessment of the foreign currency balance of the accounts derived from foreign currencies at the end of the accounting period.

Article 9. Settling the exchange differences when consolidating the Financial statements on the overseas activities and offices and the Financial statement of the enterprise:

1. The exchange differences arising when converting the Financial statements on the overseas activities into the currency of Vietnamese accounting shall be recorded into the financial income or financial expense of the enterprise.

2. The exchange differences arising when converting the Financial statements of an overseas office into the currency of Vietnamese accounting shall be cumulatively and separately expressed on the Balance sheet until the overseas office is liquidated, and then the exchange differences shall be recorded into the financial income or financial expense of the enterprise.

The recording of the exchange differences from Article 5 to Article 9 must comply with the current accounting regime.

Part C

TRANSITIONAL PROVISIONS

Article 10. Transitional provisions

The enterprises that have reassessed the foreign currency balance payable at the end of the year according to the Circular No. 201/2009/TT-BTC dated October 15^th 2009 of the Ministry of Finance, that the foreign exchange gain has not been completely distributed to the expense in the year, the residual amount shall be distributed to the financial expense of the enterprise. The distribution period depends on the remaining years as from this Circular takes effect.

Part D

IMPLEMENTATION ORGANIZATION

Article 11. Implementation provisions

This Circular takes effect on December 10^th 2012, applies from the fiscal year 2012, and supersedes the Circular No. 201/2009/TT-BTC dated October 15^th 2009 of the Ministry of Finance, guiding the settlement of the exchange differences in enterprises.

The organizations are recommended to send feedbacks on the difficulties arising during the course of implementation to the Ministry of Finance for consideration and settlement./.