Circular No. 22/2017/TT-NHNN dated December 29, 2017 of the State Bank of Vietnam on the amendment and supplement of several accounts in the accounts system of credit institutions issued in conjunction with the Decision No. 479/2004/QD-NHNN dated April 29, 2004 and regime on financial statements for credit institutions promulgated together with the Decision No. 16/2007/QD-NHNN dated April 18, 2007 of the Vietnam State Bank Governor

THE STATE BANK OF VIETNAM

Circular No. 22/2017/TT-NHNN dated December 29, 2017 of the State Bank of Vietnam on the amendment and supplement of several accounts in the accounts system of credit institutions issued in conjunction with the Decision No. 479/2004/QD-NHNN dated April 29, 2004 and regime on financial statements for credit institutions promulgated together with the Decision No. 16/2007/QD-NHNN dated April 18, 2007 of the Vietnam State Bank Governor

Pursuant to the Law on the Vietnam State Bank dated June 16, 2010;

Pursuant to the Law on credit institutions dated June 16, 2010 and the Law on the amendment and supplementation of a number of articles of the Law on credit institutions dated November 20, 2017;

Pursuant to the Law on accounting dated November 20, 2015;

Pursuant to the Decree No. 16/2017/ND-CP dated February 17, 2017 of the Government defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam;

At the proposal of the Director of the Financial Accounting Department;

The Vietnam State Bank Governor promulgates the Circular on the amendment and supplement of several accounts in the accounts system of credit institutions issued in conjunction with the Decision No. 479/2004/QD-NHNN dated April 29, 2004 and regime on financial statements for credit institutions promulgated together with the Decision No. 16/2007/QD-NHNN dated April 18, 2007 of the Vietnam State Bank Governor.

Article 1. To amend and supplement a number of contents of several accounts in the accounts system of credit institutions issued in conjunction with the Decision No. 479/2004/QD-NHNN dated April 29, 2004 of the State Bank Governor

1. To amend, supplement Point 8 Section I –General provisions as follows:

“8. To record entries related to foreign currency and gold

Recording foreign currency accounts regulated under this account system shall be implemented based on the following principles:

8.1. To enter entries and balance between foreign currency account and each kind of foreign currency.

8.2. For professions of purchasing, selling foreign currency and entries for foreign currency and entries for Vietnamese dong.

8.3. Gold in credit institutions shall be accounted as foreign currency (gold considered as a kind of foreign currency), unit is “gold thread” 99.99% and accounted through Account 4711 and 4712 to be accounted as purchasing foreign currency.

8.4. Revenues and expenses in foreign currency shall be converted into Vietnamese dong through the account of purchasing and selling foreign currency to record into revenue account in Vietnamese dong.

8.5. Accounting exchange rate

a) Exchange rate used to account professions of purchasing and selling foreign currency/gold is the actual rate at the time of arising economic and financial professions.

b) Exchange rate used to account other professions on foreign currency to convert into Vietnamese dong:

(i) Credit institutions licensed to do business on foreign currency: the average exchange rate of purchasing and selling of that foreign currency (hereinafter referred to as spot exchange rate) of credit institutions at the time that economic and financial professions arise or average spot exchange rate of changes at the day of transactions.

(ii) Credit institutions that are not licensed to do business on foreign currency: the spot exchange rate at the time of arising economic and financial professions of commercial banks that credit institutions do transactions the most in the accounting period.

(iii) If credit institutions don’t have spot exchange rate of foreign exchange rate that is converted, credit institutions shall convert into another kind of foreign currency with Vietnamese dong that are listed on the screen of Reuters or Bloomberg or other means for foreign currencies that are not listed on the screen of Reuters or Bloomberg.

8.6. At the end of the month, quarter, year, when drawing up the balance sheet converted into each kind of foreign currency, credit institutions shall convert the residual number, operating revenue of foreign currency into Vietnamese dong to summarize and reflect into the balance of account in Vietnamese dong as follows:

a) Credit institutions that are licensed to do business on foreign exchange:

(i) For monetary items that originates from foreign currency:

It shall be converted into spot exchange rate (for gold converted into average exchange rate of purchasing and selling) at the end of last working day of the month, quarter, year of credit institutions if this exchange rate difference is lower than 1% compared with average exchange rate of the last working day of the month, quarter and year.

If the spot exchange rate difference at the time of the last working day of the month, quarter, year is equal or higher 1% compared with weighted average exchange rate of last working day of the month, quarter, year, credit institutions shall use weighted average exchange rate of the last working day of the month, quarter, year to convert.

Weighted average exchange rate shall be calculated by the total weighted average exchange rate of purchasing and selling divided by two;

Of which, weighted average exchange rate of purchasing, selling is the exchange rate determined based on the total income of purchasing/selling in Vietnamese dong divided by numbers of foreign currencies sold/purchase during the day.

In case at the last working day of the month, quarter, year, credit institutions don’t have spot exchange rate, credit institutions shall convert into another kind of foreign exchange that has foreign exchange rate with Vietnamese dong that is listed on the screen of Reuters or Bloomberg or other means for kinds of foreign currencies that are not listed on the screen of Reuters or Bloomberg at the time of converting.

(ii) For non-monetary items (capital contribution by foreign currencies…): shall be converted by foreign currency rate that is recorded at the day of accounting.

b) Credit institutions that are not licensed to do business on foreign currencies:

5. To fully and promptly record dividends and profits to be included in the account 78 - Income from capital contribution, share purchase and reflected in the separate financial report of the parent company at the time of receiving right. Dividends and profits in some cases are accounted as follows:

a) Dividends and profits distributed in money or assets for the period after the investment date are recorded into revenue from financial activities at fair value at the date of receipt;

b) Dividends and profits distributed in money or assets for the period before the investment date are not recorded into revenue from financial activities but recorded decrease value of investment;

c) At the time of determining the value of the credit institution for equitization, if the investment in other enterprises is evaluated to be increased correspondingly with the ownership of the equitized credit institution in the after-tax undistributed profit of subsidiaries, associates, joint ventures, the equitized credit institution shall record the increase of the State capital in accordance with the provisions of law. Then, when receiving the dividends and profits already used for evaluating the increase of the State capital, the equitized credit institutions shall not record revenue from financial activities but record decrease value of investment;

d) In case of receiving dividends on shares, the following principles shall apply:

(i) Credit institutions in which the State does not hold 100% of the authorized capital only track the number of shares received on the notes to the financial statement, do not record the increase in the value of the investment and in the revenue from financial activities;

(ii) Credit institutions in which the State holds 100% of the authorized capital record in accordance with the law applicable to the type of enterprise that the State own 100% of the authorized capital.

6. In case of capital contribution or investment in foreign currency, the credit institution must convert the currency into the currency unit in accounting book at the exchange rate specified at Point 8, Section I-General provisions. The credit institution shall not be allowed to re-evaluate the capital contributed for the purchase of shares, even in case of exchange rate differences to record the increase (decrease) of capital contribution.

Account 34 has the following level II and III accounts:

341 - Investments in subsidiaries in VND

342 - Capital contributed to joint ventures in VND

             3421 - Capital contributed to joint ventures with other credit institutions

             3422 - Capital contributed to joint ventures with economic organizations

343 - Investments in associates in VND

344 - Other long-term investments in VND

345 - Investments in subsidiaries in foreign currencies

346 - Capital contributed to joint ventures in foreign currencies

             3461 - Capital contributed to joint ventures with other credit institutions

             3462 - Capital contributed to joint ventures with economic organizations

347 - Investments in associates in foreign currencies

348 – Other long-term investments in foreign currencies

349 - Provision for the devaluation of long-term investment

Account 341- Investment in subsidiaries in VND

Account 345 - Investment in subsidiaries in foreign currencies

This account is used to reflect the current value and fluctuation of the direct capital investment in the subsidiary. Subsidiary is a company belonging to one of the cases regulated in Article 30, Paragraph 4 of the Law on Credit Institutions.

Record on this account must comply with the regulations of recording for account 34, Vietnamese Accounting Standard No. 25- Consolidated Financial Statements and the following regulations:

Accounting for economic operations arising in the business combination process of a credit institution that is identified as a buyer in the case of a business combination process resulting in a parent-subsidiary relationship shall be made in accordance with Vietnamese Accounting Standards No. 11 - Business Combinations and Circulars guiding this Standard.

Debit: - The actual value of the investment in the subsidiary increases.

Credit: - The actual value of the investment in the subsidiary decreases.

Debit balance: - The existing actual value of the investment in the subsidiary.

Detailed accounting: - Opening detailed accounts for each subsidiary.

Account 342 - Capital contributed to joint ventures in VND

Account 346 - Capital contributed to joint ventures in foreign currency

This account is used to reflect all the capital contributed to joint ventures in form of establishment of jointly controlled business establishments and the situation of recovering capital contributed to joint ventures upon termination of the joint-venture contract.

Jointly controlled business establishments are established by joint venture partners. A jointly controlled business establishment is a business establishment newly established, operating independently, operating as an enterprise but is still subject to the control of the joint venture partners under the joint venture contract. Jointly controlled business establishments have to carry out separate accounting work according to the current law provisions on accounting.

Capital contributed to a jointly controlled business establishments includes all assets, capital owned by the enterprise, including long-term loans used for capital contribution.

Accounting a on this account must comply with the regulations on accounting account 34, Vietnamese Accounting Standard No. 08- Financial information on joint-venture capital contributions and the following regulations:

1.Investments in jointly controlled business establishments are record on this account when the credit institution has the right to jointly control the financial and operating policies of the jointly controlled business establishments. When the credit institution no longer has the right to jointly control, it must reduce the investment in the jointly controlled business establishment on these accounts.

2. Capital contributed to the joint venture is implemented in three forms: jointly control business operation, jointly control assets, and jointly control business establishments. Accounts 342, 346 are only used to record joint ventures in the jointly control business establishments, are not used for jointly control business operation and jointly control assets.

3. The value of capital contributed to a jointly controlled business establishment reflected on this account must be the value of capital contribution evaluated and approved by the joint-venture parties in the capital contribution document.

4. Expenses directly related to the investment in associates and jointly controlled business establishments are recorded as financial expenses in the period.

5. When recovering contributed joint-venture capital, write down the contributed capital amount based on the value of assets and money returned by the joint-venture business establishments. In case of loss due to failure to recover enough contributed capital, such loss shall be recognized as a business operation expense of the credit institution. When the recovered value is higher than the contributed capital amount, such profit shall be recognized as income from capital contribution, share purchase.

6. The joint-venture capital contributors to jointly controlled business establishments may transfer the value of their contributed capital in joint ventures. When the transfer value is higher than the contributed capital amount of the jointly controlled business establishment, the difference of interests resulting from the transfer of capital shall be reflected in the Credit side of the account Other income.

7. Jointly controlled business establishments are not allowed to record any expenses related to the transfer of contributed capital of the joint venture.

8. Credit institutions that buy the contributed capital of other parties in a jointly controlled business establishment shall reflect the capital contributed to the jointly controlled business establishment at the actual purchase price.

Debit: - The amount of capital contributed to the jointly controlled business establishments increased.

Credit: - The amount of capital contributed to the jointly controlled business establishments decreased due to withdrawal or transfer, because they no longer have the right to jointly control.

Debit balance: - The amount of capital contributed to jointly controlled business establishments at the end of the period by the credit institution.

Detailed accounting: - Opening detailed accounts for each jointly controlled business establishment.

Account 343- Investments in associates in VND

Account 347- Investments in associates in foreign currency

This account is used to reflect the value of the direct investment of the investor in the associate and the fluctuation of the investment in the associate. Associated companies of credit institutions are companies regulated in Article 30, Paragraph 4 of the Law on Credit Institutions.

Accounting a on this account must comply with the regulations on accounting account 34 and the following regulations:

The basis for accounting in the book the value of investments in associates is as follows:

- For investments in a shareholding company listed on the securities market, the book recording of the credit institution is based on the amount actually paid for the purchase of stock, including directly related expenses to the stock purchase and the official announcement of the Securities Trading Center regarding the purchase of stock of the associate which belongs to the investor;

- For investments in joint-stock companies not yet listed on the stock market, the book recording is based on the certificates of stockownership and notes on the sale of stock of invested companies or certificates purchasing of the investment;

- For investments in other types of enterprises, the book recording is based on the capital contribution documents, the certificates and documents on sale and purchase of such investment;

- Credit institutions may only record dividends and profits distributed from associate upon receipt of the official notice of the associate regarding the amount of dividends to be received or the amount of profits distributed in the period.

Debit: - Cost of investments in associates increased.

Credit: - Cost of investment decreased due to the receipt of interests other than dividends.

- Cost of investment decreased due to the sale or liquidation of all or part of the investment.

Debt balance:- Cost of investment in associates.

Detailed accounting: - Opening detailed accounts for each associate.

Account 344- Other long-term investments in VND

Account 348- Other long-term investments in foreign currency

This account is used to reflect the current value and the fluctuation of other long-term investments (other than investments in subsidiaries, capital contributed in jointly controlled business establishments, investments in associates in accordance with Article 29, Paragraph 4 of the Law on Credit Institutions and types of shares listed on the securities market).

Accounting a on this account must comply with the regulations on accounting account 34 and the following regulations:

Accountants must track in detail according to the following criteria:

-For stock investment: detailed tracking of each type of, each subject to issue shares;

- For contractual capital contributions and non-listed shares: detailed tracking of each capital contributor.

Debit: - The value of other long-term investments increased.

Credit: - The value of other long-term investments decreased.

Debit balance: - The value of other existing long-term investment of the credit institution.

Detailed accounting: - Opening detailed accounts for each investor.

Account 349 - Provision for long-term investment

This account is used to reflect the current status and fluctuations in the provision for long-term investment.

Article 3.Responsibilities and implementation organization

Director of State Bank’ Office, Director of Finance - Accounting Department, Head of related units of the State Bank, State Bank branches in provinces, cities under the central Government’s management, Chairman of Board of Directors, Chairman of Board of Members and General Director (Director) of credit institutions, foreign bank branches shall be responsible for the implementation of this Circular./.

Article 4.Effect

1. This Circular takes effect on April 01, 2018.

2. Since the effective day of this Circular, these following regulations shall be ceased:

a) Clause 20, Clause 25, Clause 28, Clause 29, Clause 46 and Clause 50 Article 2 of the Circular No. 10/2014/TT-NHNN dated March 20, 2014 of the State Bank amending and supplementing several accounts in the accounts system of credit institutions issued in conjunction with the Decision No. 479/2004/QD-NHNN dated April 29, 2004 of the State Bank.

b) Clause 3 Article 1 and Clause 2, Clause 3 Article 2 of the Circular No. 49/2014/TT-NHNN dated December 31, 2014 of the State Bankon amendments and supplements to a number of articles in the financial reporting policies applicable to credit institutions issued together with Decision No. 16/2007/QD-NHNN dated April 18, 2007 and the account system of credit institutions issued together with the Decision No. 479/2004/QD-NHNN dated April 29, 2004 of the State Bank Governor./.

For the Governor of the State Bank of Vietnam

The Deputy Governor

DAO MINH TU