Circular No. 89/2013/TT-BTC of June 28, 2013, amending and supplementing the Ministry of Finance’s Circular No. 228/2009/TT-BTC of December 7, 2009, guiding the setting-up and use of provisions for devaluation of inventories, loss of financial investments, receivable bad debts and the warranty for products, goods and construction and installation works at enterprisesCircular No. 89/2013/TT-BTC of June 28, 2013, amending and supplementing the Ministry of Finance’s Circular No. 228/2009/TT-BTC of December 7, 2009, guiding the setting-up and use of provisions for devaluation of inventories, loss of financial investments, receivable bad debts and the warranty for products, goods and construction and installation works at enterprises

THE MINISTRY OF FINANCE

Circular No. 89/2013/TT-BTC of June 28, 2013, amending and supplementing the Ministry of Finance’s Circular No. 228/2009/TT-BTC of December 7, 2009, guiding the setting-up and use of provisions for devaluation of inventories, loss of financial investments, receivable bad debts and the warranty for products, goods and construction and installation works at enterprises

Pursuant to the Securities Law;

Pursuant to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, detailing and guiding a number of articles of the Law on Enterprise Income Tax;

Pursuant to the Government’s Decree No. 122/2011/ND-CP of December 27, 2011, amending and supplementing a number of articles of the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, detailing and guiding a number of articles of the Law on Enterprise Income Tax;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the director of the Corporate Finance Department;

The Minister of Finance promulgates the Circular to amend and supplement the Ministry of Finance’s Circular No. 228/2009/TT-BTC of December 7, 2009, guiding the setting-up and use of provisions for devaluation of inventories, loss of financial investments, receivable bad debts and the warranty for products, goods and construction and installation works at enterprises (below referred to as Circular No. 228/2009/TT-BTC), as follows:

Article 1. To amend and supplement Clause 2, Article 5 of Circular No. 228/2009/TT-BTC as follows:

a/ Objects: Capital amounts currently invested by an enterprise in economic organizations established under law (including limited liability companies and joint-stock companies ineligible for the setting-up of provisions under Clause 1, Article 5 of Circular No. 228/2009/TT-BTC, joint-venture companies and partnerships) and other long-term investments for which provisions must be set up if such economic organizations suffer losses (except losses anticipated in the business plans before investment is made).

Provisions for long-term investments must be set up for investments presented according to the method of historical cost but not for investments presented according to the method of equity capital in accordance with law.

b/ Conditions: An enterprise may set up provisions only when the owner’s total actual investment capital is larger than the total value of actual equity capital of the invested economic organization;

c/ Method of setting up provisions:

The level of provision to be set up for each financial investment equals the invested capital amount and is calculated according to the following formula:

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