- This article mentionted all the international accounting standards, in order to orient the contents should be added, modified in the accounting standards which was issued and issue new accounting standards to meet with international accounting standards and in accordance with the conditions of Vietnam, including accounting standards on government grants and gives out information of government grants and at the same time, do the analyze the current regulations of Vietnam accounting system of government grants so that this article can provide recommendations for the guidance, specific additional accounting of subsidies government to meet the international accounting standards.. - Vietnam’s enterprises always have supports from the Government of Vietnam through different forms during their operating process. - Annually, with national objectives related programs, the Government has spent billions subsidizing enterprises in a variety of areas in order to untangle challenges for business activities, promote exports, enhance job security. - The Government’s forms of subsidizing can be grant relating to assets, earnings, loans, interests, grant relating to taxes like tax exemption or reduction, or tax breaks, grant relating to losses covering like covering. - accounts recording and showing information about grants from the Government are usually just recorded in enterprises where the Government is one stockholder and mainly recorded under the subsidizing form through assets. - This fact came from the inadequacy in the principles themselves for the current regime for enterprises accounting, which has not established accounting principles with scientific standards to suit international accounting standards, lack in content, not able to reflect exchanges happening from actual activities of enterprises when receiving grants from the Government. - The consequence is the Government’s inability to control and manage the grants that they have subsidized for enterrises, hence not being able to maintain strictness in performing law principles regarding the budget, finances and accounting. - From the above reasons, delivering content that needs instructing about accounting grants from the Government and showing information about Government’s grants to suit international accounting standards in enterprises is absolutely necessary.. - Grants from the Government of this kind do not include indirect advantages earned when adhering to mutual conditions in financial activities like infrastructure in construction areas, taxes in the conditions of commerce and competition. - According to Robert S.Kaplan, Anthony A.Atkinson, Advanced financial Accounting, third Edition, Prentice Hall International, Inc: When accounting government’s grants, there are two points to consider: Firstly, when the government delivers the grant, and secondly when using such grants in activities according to pre-determined objectives. - The situation in which loans have smaller interests than interests in the market is also treated as governmental grants. - Accounting units need to research conditions and responsibilities needed to be complied especially fees attached to benefits from governmental grants. - When governmental grants are accounted, all assets, potential loans are dealt with according to IAS 37 – Prevention, paying debts and potential assets.. - Apart from that, governmental grants need to be accounted into results organizedly through periods that match with the accounting of fees relating to grants.. - Philip Wraith (2003), “The dimensions of, and factors giving rise to, variations in national management accounting approaches”, European Business Review, Vol. - 3: Governmental grants are not accounted when there’s no proper insurance that the unit has sufficient conditions attached to that grant. - The way of receiving the grant does not affect the accounting method to be applied. - FRS 102 are the standards for financial statements on governmental grants applied for the UK and Ireland. - In this research, PWC carried out detailed instructions when applying FRS 102 standards to account for governmental grants in reality. - In accordance with the research on theoretical as well as practical problems when applying the international standards IAS 20 in Romani by co-authors Mates Dorel, Mot Ioana và Aura Domil in the article “Conceptual Approaches concerning government grants (Romania case study)” published on the journal Agriculture Management. - In this research, the authors went deeply in to analyzing basic components of standards, including: concepts, scope, categories, utilizing methods to account governmental grants… and authors provided specific situations to instruct how to apply principles of the above standards in practice. - Besides, the authors also mentioned principles from regulations built by the EU that affect the accounting process of governmental grants. - In general, the group of authors concluded that IAS 20 have solved all problems related to the accounting process of governmental grants and loans.. - In Vietnam, regarding researches on governmental grants in enterprises, there are currently probably too few research projects of accountants that have been organizedly done on this matter.. - Doctor Doan Van Anh in the article “Science and Technology developing funds – problems in accounting and proposal for completion” published on the Accounting and Auditing Journal (vol . - Based on the analyses on problems of current principles, on the opinion and rules for completion, the author proposed accounting records about the establishment of the enterprise’s Science and Technology Developing fund, the parts of fund set up by the supports of the government need to be noted as a reduction in the amount submitted to the government on TK 333 (3334 in particular) “Enterprise Revenue. - As can be generalized from the aforementioned research projects, they have not properly solved the problems arised from within the deals, not fulfilling all forms and methods of subsidizing from the government to enterprises, as well as not offering specific principles in accounting records of governmental grants to match international accounting standards.. - Focusing on the gaps within the above research projects, the author of this research will carry out contents that needed instructing about the accounting process and presentation of governmental grants to match international accounting standards (IAS 20). - The objectivies of this article is to study all international accounting standards in order to guide the content that needs to be supplemented and revised in the accounting issued standards and to promulgate new accounting standards that accordance with international accounting standards &. - The topic of analysing the status of the Vietnamese accounting system for the government subsidies. - Principles of Vietnam’s accounting system regarding the accounting of Governmental grants in reality. - In the trend of international economy integration, Vietnam has various encouraging and supportive policies for enterprises to develop towards the government’s specific objectives, including:. - Enterprise Revenue Taxes reduction or exemption in the field of Production Business or in the area of preferential investment;. - In reality, in prior years, there have arisen grants or supports from the government, typically in recent years when Intel Corporation (of the USA) invested in the establishment of Intel Products Vietnam LLC, the government of Vietnam has subsidized three amounts:. - The situation in which Intel Corporation is exempted from land leasing expense in 50 years equals the fact that Intel is subsidized annually by the Government an amount equivalent to the land leasing expense other enterprises have to spend in the industry zone.. - 4 year of Tax exemption, 50% tax reduction in the following 9 years for enterprises that conduct research on the development of science and technology, application of high-tech in the list of highly technological products are preferred for investment and development according to the regulations of High Technology. - Law, creating high technology, creating enterprises with high technology, risky investment for the development of high technology in the list of high technology is preferredly developed according to the law regulations on high technology, investing on the establishment-trades of facilities that create high technology or create high technology enterprises. - However, until now, Vietnam has not published accounting standards on governmental grants and presented information on governmental grants in accordance with international accounting standards (IAS 20) that are published in 1983 and supplemented in 2008 by IASB and IFAC.. - /TT-BTC) has not instructed how to account governmental grants and present financial statements with information on governmental grants. - Circular No.200/TT-BTC regulated governmental grants recently mentioned the following problems:. - Principles relating to activities of receiving the capital provided by the government are recorded directly as owner’s equity according to the value on records of capital transferring. - There are principles relating to “Revenue from price supports” on account 5114 under the circumstance when enterprises conducted the mission to provide products, goods and services according to the demand by the government. - This financial benefit is recorded by the enterprise as an amount payable to the government on account 3339 “Fees, fares and other amounts payable”. - These principles have not solved entirely all problems arised from within the deals, not fulfilled all forms and methods of subsidizing from the Government to enterprises.. - grants, not having mentioned the capital or revenue method in recording grants and not consisting of presenting requirements about grants and supports from the Government.. - Some proposals for guidelines of the accounting process of governmental grants and presenting information about current governmental supports. - Therefore, in the upcoming time, the Ministry of Finance needs to conduct research and publish accounting standards and instruct how to account governmental grants and present information about governmental grants in such a way that matches IAS 20. - These principles are the basis for enterprises to uniformly conduct accounting methods as well as sufficiently present information about governmental grants and supports. - From there, financial statements readers have enough information about the influence of governmental grants on the financial condition and financial outcomes of enterprises. - 5.1 Requiring research to publish accounting standards on governmental grants and present information about governmental grants. - This standard regulated the identification of accounting methods and presentation on governmental grants. - The special arisings in the accounting process of governmental grants on financial statements when there are changes in pricing or in supplementary information about relating actions.. - Governmental grants for enterprises under different forms to identify revenue with tax or to limit the basis to calculate taxes for enterprises‘ revenue. - Enterprises whose owners are the government;. - Governmental grants regulated in agricultural accounting standards.. - 5.1.2 Terminologies used in this accounting standard need to be differentiated:. - The government Chính phủ is governmental authorities and equivalent authorities regardless of being local, national or international.. - Government grants: is the act of government delivering power to enterprises with the condition that in the past or future enterprises must comply with certain conditions from the government in their business activities. - These grants do not include governmental grants without specific value and exchanges with the government that are not different from normal exchanges of the enterprise.. - Grants relate to assets: are the grants from the government that enterprises having sufficient conditions to receive the grant must purchase or invest in building fixed assets and using them for their own financial. - Grant related to income: are governmental grants that are not assets related ones.. - The case when enterprises receive governmental grants has important meanings so it has to be recorded and presented in financial statements for 2 reasons: (i) Grants when being transferred need to be accounted appropriately. - (ii) Benefits that enterprises earn from the reporting period of the supports need to be clearly identified and presented. - 5.1.3 Governmental Grants. - Grants in different forms have to be accounted with the same method, regardless of whether they are in cash or as a reduction of liabilities to the government.. - A loan can be forgiven by the government and be considered a governmental grant when there is reasonable insurance that the enterprise will obtain conditions needed for the loan to be forgiven.. - Secondly, Governmental grants are recorded in the financial outcomes report organizedly during accounting periods that enterprises record expenses related to the amount of grant received.. - There are two approaches for accounting Governmental grants in accordance with IAS 20 for enterprises to choose from, which are:. - Capital approach, by which the grant is recorded in the Balance Sheet. - The theoretical basis for this approach is: (i) Governmental grants are financial tools that do not need to be refunded so they should be recorded in Balance sheets rather than Business reports to balance with related expenses. - (ii) Recording governmental grants in business reports is not appropriate because they are not revenue generated by enterprises themselves so they should be shown as a supporting amount from the government for enterprises.. - Income approach, by which grants are recorded in one or multiple business reports.The theoretical basis for this approach: (i) Governmental grants are not received by stockholders, so they should not be recorded as capital but should be reflected into business reports of the right period. - (ii) enterprises could only receive governmental grants when they have insured that all attached conditions have been met, so these grants need to be recorded in business reports during the accounting period with the arising of relating expenses to compensate for these expenses. - Thirdly, governmental grants need to be recorded logically in accounting periods to report business outcomes to compensate for related expenses that arose in accordance with appropriate principles. - The recording of governmental grants right at the receiving moment is not in accordance with accrual accounting principles, except for when enterprises have no basis for the distribution of grants in multiple periods rather than recording them in the receiving period of the grants.. - In most cases, the recording periods of expenses related to governmental grants are usually specific. - Therefore, grantsare recorded in suitable revenue to related expenses that arise in the same period (like the loan with preferential interest rates). - Similarly, grants related to fixed assets with a depreciation amount will have to be recorded equivalent to the depreciation amount recorded on business reports.. - Grants related to fixed assets that are not calculated with depreciation might be involved in conducting some liabilities and are recorded in business reports in the periods where expenses arise to perform those responsibilities. - A governmental grant is an amount receivable when the compensation for expenses or losses arise or for the purpose of supplying direct financial supporting amount for enterprises without the arising of related expenses in the future will be recorded in the period that it was noted as an amount receivable.. - These grants are meant for certain enterprises, the case of which has to be recorded in the revenue of the period that enterprises have obtained sufficient conditions to receive grants and be presented clearly for the influence of grants to be rightfully understood.. - These grants are recorded in revenue in the period when the grant is noted as an amount receivable.. - Governmental grants that are related to assets, including assets not in cash which are identified with rational values, according to IAS 20, will be presented on balance sheets: (i) like a delayed revenue or (ii) deducted from the value of assets.. - For example, enterprises are funded by the government for the construction project, account payable 3387/ account 5114.. - Grants related to revenue, according to IAS 20, enterprises present on business reports into a separate revenue objective about grants, price supports or in the target “Other revenue” or are deducted to related expenses.. - 5.1.6 Returning Governmental grants. - The nature, the scope of governmental grants recorded in business reports and other supporting types from the government from which enterprises benefit directly.. - 5.2 The need to conduct research on guidelines for accounting to reflect accounting principles and approaches applied to governmental grants. - Governmental grants are governmental supports in the form of delivering resources for enterprises under the condition that enterprises have to conform to several conditions by the government which relate to enterprises‘ business activities.. - Governmental grants will not be recorded until there is certain insurance that:. - Grants will be recorded as revenue from governmental grants logically throughout the subsidizing time in a suitable way to expenses that these grants compensate for.. - 5.2.2 Methods to account governmental grants. - he basis for the above way of recording is that governmental grants to establish long- term assets have to be recorded in revenue that is not formed of enterprises and distributed gradually into revenue in accounting periods appropriate with business production expenses that these grants compensate for.. - The case when the government subsidized with cash to compensate for expenses like interest rates supports after investment that enterprises have spent during the period will be recorded immediately in the revenue in the period that expenses arise, accountants will note:. - If the disbursement is performed in the following period because time is needed to finish administrative procedures for the disbursing amount and enterprises ensure all conditions to obtain the disbursement, the grant is recorded as a receivable, accountants will note:. - In the case when enterprises are subsidized under the form of a land lease reduction or exemption in a certain amount of time, enterprises have to identify the reasonable value of the amount of land lease fees that was reduced or exempted, and record the supports according to the identified value of the amount subsidized.. - At the same time, enterprises‘ expenses need to be reflected sufficiently to be able to compare with other enterprises in the same field but are not receiving the preferential of land rental fees reduction or exemption.. - Above are several proposals of guidelines on how to account governmental grants and present information about governmental grants. - Hopefully, in the near future the Ministry of Finance needs to conduct research and publish accounting standards and instruct how to account governmental grants and present information about governmental grants in such a way that matches IAS 20. - Nicolae, “The Accounting treatment applicable to the structural funds in accordance with the international financial standards – IAS Economics Series Vol 22, Issue 1
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