Circular 48/2019/TT-BTC on setting up provisions for devaluation of inventories, loss of investments, bad debts and warranty of products, goods, services, construction works at the enterprise

CIRCULARS

INSTRUCTIONS FOR INSTALLATION AND HANDLING OF PROPERTIES, GOODS, SERVICES, CONSTRUCTIONS AND PRODUCTS, GOODS, SERVICES AND CONSTRUCTIONS WARRANTY

Pursuant to Decree No. 87/2017/ND-CP dated July 26, 7 of the Government defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Government's Decree No. 218/2013/ND-CP dated December 26, 12 detailing and guiding the implementation of the Law on corporate income tax;

Pursuant to the Government's Decree No. 91/2014/ND-CP dated October 01, 10 amending and supplementing a number of articles in the Decrees on tax regulations; Decree No. 2014/12/ND-CP dated February 2015, 12 of the Government detailing the implementation of the Law amending and supplementing a number of articles of the Law on Taxation and amending and supplementing a number of articles of the Law on Taxation. Tax Decree;

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

The Minister of Finance promulgates a Circular guiding the setting up and handling of provisions for devaluation of inventories, loss of investments, bad debts and warranties of products, goods and services. , construction works at enterprises,

Chapter I

GENERAL RULES

Article 1. Scope of adjustment and subject of application

1. This Circular guides the setting up and handling of provisions for devaluation of inventories, provision for loss of investments, provision for loss of bad debts and provision for warranties of products and goods. goods, services, and construction works as the basis for determining deductible expenses when determining income subject to corporate income tax as prescribed.

The setting up of reserves for the purpose of making and presenting financial statements of economic organizations complies with the accounting law.

2. This Circular applies to entities being economic organizations (hereinafter referred to as enterprises) established, conducting production and business activities in accordance with Vietnamese law.

Credit institutions, foreign bank branches legally established in Vietnam shall set up and handle provisions in accordance with this Circular. Particularly for risk provisions in operations of credit institutions, foreign bank branches shall make provision and use according to regulations promulgated by the State Bank of Vietnam after reaching agreement with the Ministry of Finance.

Article 2. Explain words

In this Circular, the terms below are construed as follows:

1. Provision for devaluation of inventories: is the provision for diminution in net realizable value lower than the carrying amount of inventories.

2. Provision for loss of investments: is the provision for loss in value that may occur due to a decrease in the value of securities held by the enterprise and provision for possible loss due to a decrease in value. Other investments of the enterprise in economic organizations receiving capital contribution (excluding investments abroad).

3. Provision for bad debts: is the provision for the loss value of overdue debts and undue receivable debts that are unlikely to be recovered on time.

4. Provision for warranty of products, goods, services and construction works: is a reserve for expenses for products, goods, services, construction works sold, supplied or handed over. to the buyer, but the enterprise is still obliged to continue to repair and complete according to the contract or commitment with the customer.

Article 3. General principles in setting up provisions

1. Provisions specified in this Circular shall be included in deductible expenses when determining taxable income in the annual reporting period in order to make up for possible losses in the following year's reporting period. ; ensure that the value of inventories, investments is not higher than market price and the value of receivables is not higher than the amount recoverable at the time of financial statements. main year.

2. The time of setting up and reversing the provisions is the time of making the annual financial statements.

3. Enterprises consider and decide to develop regulations on management of supplies and goods, management of investment portfolios, and management of debts to limit business risks, in which responsibilities are clearly defined. responsibility of each department, each person in monitoring and managing materials, goods, investments, debt recovery.

4. Enterprises do not make provision for risks for offshore investments.

Chapter II

SPECIFIED

Article 4. Provision for devaluation of inventory #

1. Objects of provisioning include raw materials, materials, tools, instruments, goods, goods purchased in transit, goods sent for sale, goods in bonded warehouses, and finished products (hereinafter referred to as goods for short). inventory) whose original cost recorded in the accounting books is higher than the net realizable value and meets the following conditions:

Having legal invoices and documents as prescribed by the Ministry of Finance or other reasonable proofs to prove the cost of inventory.

– Is the inventory owned by the enterprise at the time of making the annual financial statements.

2. The level of provisioning is calculated according to the following formula:

In which:

– Original cost of inventories is determined according to the provisions of Accounting Standard No. 02 – Inventories issued together with Decision No. 149/2001/QD-BTC dated December 31, 12 of the Minister of Finance and revised, supplemented or replaced text (if any).

- Net realizable value of inventories determined by the enterprise is the estimated selling price of inventories in the normal production and business period at the time of preparation of the annual financial statements minus (-) the estimated costs to complete the products and the estimated costs necessary for their consumption.

3. At the time of making annual financial statements, on the basis of documents collected by enterprises proving that the original cost of inventories is higher than the net realizable value of the inventories, the basis specified in Clause 1 and 2 of this Article, the enterprise shall make provision for devaluation of inventories as follows:

a) If the provision to be made is equal to the balance of the provision for devaluation of inventories already made in the previous year's report recorded in the accounting books, the enterprise is not allowed to make additional provision for devaluation of inventories. warehouse;

b) If the amount of provision to be set up is higher than the balance of the provision for devaluation of inventories already made in the previous year's report recorded in the accounting book, the enterprise shall make additional deduction to the cost of goods sold in the period.

c) If the amount of the provision to be set up is lower than the balance of the provision for devaluation of inventories already made in the previous year's report recorded in the accounting book, the enterprise shall refund the difference and record the decrease in cost of capital goods sold in the period.

d) The level of provision for devaluation of inventories shall be calculated for each inventory item which is depreciated in price and summed up in a detailed list. The detailed list is the basis for accounting in the cost of goods sold (cost of all products and goods sold in the period) of the enterprise.

4. Handling of inventories for which provision has been made:

a) Inventories due to natural disasters, epidemics, fires, damaged, out-of-fashion, technical backward, obsolete due to changes in natural biochemical processes, expired, no longer valid for use must be handled, canceled or liquidated.

b) Handling competence:

The enterprise shall set up a Handling Council or hire a consulting organization with price appraisal function to determine the value of canceled or liquidated inventories. The inventory record to determine the value of processed inventory made by the enterprise clearly identifies the value of damaged inventory, the causes of damage, types, quantity and value of recoverable inventory. (if).

The Board of Directors, the Members' Council, the President of the company, the General Director, the Director, the owner of the private enterprise and the owner of other economic organizations shall, based on the minutes of the Council, handle or propose to the Board of Directors. the output of the consulting organization with the function of price appraisal, the evidence related to the inventory to decide to handle the cancellation or liquidation; decide to handle the responsibility of those related to such inventory and take responsibility for their decisions in accordance with the law.

c) Actual loss of each type of unrecoverable inventory is the difference between the value recorded in the accounting book minus the recovered value from the person who caused damage to compensations, from the insurance insurance agency. and from inventory liquidation.

The actual loss value of unrecoverable inventories has been decided to handle, after being offset with the reserve for devaluation of inventories, the difference is accounted into the cost of goods sold of the enterprise.

Article 5. Allowance for losses of investments #

1. Securities investments:

a) Objects of provision are securities issued by domestic economic organizations in accordance with the securities law, which the enterprise owns at the time of preparation of the annual financial statements that fully satisfy the following conditions: after:

- Is the securities listed or traded on the domestic stock market that the enterprise is investing.

– Are securities that are freely traded on the market but at the time of making the annual financial statements, the actual price of securities on the market is lower than the value of the securities investment currently recorded in the accounting books.

b) The level of provision for devaluation of securities investment is calculated according to the following formula:

– For listed securities (including stocks, fund certificates, derivative securities, listed covered warrants): the actual price of securities on the market is calculated according to the closing price at the date of trading. most recent transactions up to the time of making annual financial statements.

If the stock has been listed on the market and there has been no transaction within 30 days before the date of provisioning, the enterprise shall determine the level of provision for each securities investment in accordance with the provisions of point b, clause of 2 Article. this.

In case, at the date of setting up the provision, the securities are delisted or the transactions are suspended or the transactions are stopped, the enterprises shall determine the level of provisions for each securities investment according to the provisions of Point b, Clause 2. This.

– For shares registered for trading on the trading market of unlisted public companies and state-owned enterprises that are equitized in the form of a public offering of securities (Upcom), the price Actual securities on the market are determined to be the average reference price in the last 30 consecutive trading days before the time of making annual financial statements announced by the Stock Exchange. In case the shares of a joint stock company registered for trading on the Upcom market have not been traded within 30 days before the time of preparing the annual financial statements, the enterprise shall determine the provision for each investment. securities as prescribed at Point b, Clause 2 of this Article.

– For Government bonds: the actual bond prices on the market are the average of prices that are firmly committed by the market maker to bid in the bidding session as prescribed in Decree No. 95/2018/ND -CP dated June 30, 6 on issuance, registration, custody, listing and trading of Government debt instruments on the stock market; guiding documents of the Ministry of Finance and documents amending, supplementing or replacing, if any. In the absence of a firm commitment offer above, the actual bond price on the market is the most recent transaction price at the Stock Exchange within 2018 days up to the time of making the financial statements. In case there is no transaction within 10 days up to the time of making the annual financial statement, the enterprise does not make provision for this investment.

- For municipal bonds, government-guaranteed bonds and corporate bonds: bond prices on the market for municipal bonds, government-guaranteed bonds and listed corporate bonds Listed and registered for trading are the latest transaction prices at the Stock Exchange within 10 days up to the time of making financial statements. If there is no transaction within 10 days up to the time of making annual financial statements, the enterprise does not make a provision for this investment.

c) At the time of making the annual financial statements, if the actual investment value of the securities investment currently recorded in the accounting books of the enterprise is reduced compared with the market price, the enterprise must make a provision in accordance with the provisions at Points a and b, Clause 1 of this Article and the following provisions:

– If the provision to be made is equal to the balance of the provision for devaluation of securities investment already made in the previous year's report recorded in the accounting books, the enterprise is not allowed to make additional provision for investment devaluation. stock.

– If the amount of provision to be set up is higher than the balance of the provision for devaluation of securities investment already made in the previous year's report recorded in the accounting books, the enterprise shall make additional allowance for such difference and record it in the accounting books. expenses for the period.

– If the provision to be made in this period is lower than the balance of the provision for devaluation of securities investment made in the previous year's report recorded in the accounting books, the enterprise shall reverse the difference and record a decrease in value. expenses for the period.

– The enterprise must make a separate provision for each securities investment with fluctuations in price at the time of preparation of the annual financial statements and this shall be aggregated into the detailed list of provisions for devaluation of securities investments as based on the cost of the enterprise.

– The level of provisioning for each securities investment determined at Point b, Clause 1 of this Article is at most equal to the actual investment value currently recorded in the enterprise's accounting books.

d) For unlisted securities, not yet registered for trading, the enterprise shall determine the level of provision for each securities investment according to the provisions of Point b, Clause 2 of this Article.

2. Other investments:

a) Subjects: are investments in domestic economic organizations, not securities investments as prescribed in Clause 1 of this Article, owned by enterprises at the time of preparation of annual financial statements. the basis shows that there is a decline in value compared to the investment value of the enterprise.

b) Amount of deduction:

– Based on the separate financial statements of the capital-receiving economic organization prepared at the same time as the annual financial statement of the capital-contributing enterprise, the capital-contributing enterprise shall determine the level of provision for each investment as follows:

In which:

– Actual invested capital of owners in the economic organization receiving capital contribution at the time of making provision is determined on the annual balance sheet of the economic organization receiving capital contribution (code 411 and code). No. 412 Balance sheet – issued together with Circular No. 200/2014/TT-BTC dated December 22, 12 of the Ministry of Finance and amendment, supplement or replacement document (if any).

– Equity of the economic organization receiving capital contribution at the time of making provision is determined on the annual balance sheet of the economic organization receiving capital contribution at the time of making provision (code 410 balance sheet - promulgated together with Circular No. 200/2014/TT-BTC dated December 22, 12 of the Ministry of Finance and amendment, supplement or replacement document (if any).

c) At the time of making the annual financial statements, if the investments in economic organizations have a decrease in value compared to the investment value of the enterprise, the enterprise shall make a provision according to the provisions of Point a. a, Point b, Clause 2 of this Article and the following provisions:

– If the provision to be made is equal to the balance of the provision for investments in the entity already made in the previous year's report recorded in the accounting books, the enterprise is not allowed to make an additional provision for loss of financial assets. Investments.

– If the amount of provision to be made is higher than the balance of the provision for investments in the entity already made in the previous year's report recorded in the accounting books, the enterprise shall make additional deductions for that difference and record expenses for the period.

– If the amount of provision to be made is lower than the balance of the provision for investments in the entity made in the previous year's report recorded in the accounting books, the enterprise shall reverse the difference and record a reduction in expenses. fees for the period.

– The enterprise must make a separate provision for each investment and it shall be aggregated into a detailed list of provision for loss of investments in other entities as a basis for accounting into the enterprise's expenses.

– The level of provisioning for each investment determined at Point b, Clause 2 of this Article is up to the maximum value of the actual investment being recorded in the enterprise's accounting books.

– For the investment of debt trading enterprises contributed to joint-stock companies through the conversion of debt into contributed capital, when making provision for debt trading enterprises, accumulated losses at the receiving company are excluded. contribution arising before the time of converting debt into contributed capital.

- Where the economic organization receiving the contributed capital does not prepare a financial statement at the same time, the enterprise is not allowed to make a provision for this investment; Except for the following cases, the enterprise may make a provision based on the most recent quarterly financial statement of the economic organization receiving capital contribution:

+ Economic organizations receiving capital contribution do not prepare financial statements at the same time as the annual financial statements of capital-contributing enterprises because they have ceased operation and are pending (dissolution, bankruptcy).

+ Capital-receiving business organizations are allowed to make financial statements different from the time of making annual financial statements of capital-contributing enterprises and notify competent agencies in accordance with the accounting law. .

3. Handling of investments for which provision has been made:

When transferring an investment for which a provision has been made according to the provisions of Clauses 1 and 2 of this Article, the difference between the proceeds from the transfer of the investment and the value recorded in the accounting books may use the reserve. has made provision of this investment to offset; the remaining amount is recognized by the enterprise as an expense in the period; the remainder, the enterprise records a decrease in expenses in the period.

Article 6. Provision for doubtful debts #

1. Objects of provision are receivable debts (including loans that enterprises are lending and bonds that have not yet been registered for trading on the stock market that enterprises own) that are overdue for payment. and receivables that are not yet due for payment but are unlikely to be recovered by the enterprise on time, and at the same time ensure the following conditions:

a) There must be original documents evidencing the unpaid amount of the debtor, including:

– One of the following original documents: Economic contract, debt contract, debt commitment;

- A copy of the contract liquidation (if any);

- Debt comparison; in case of no debt collation, there must be a written request for debt collation or debt collection sent by the enterprise (with postmark or confirmation of the delivery unit);

- Liabilities lists;

- Other relevant documents (if any).

b) Having sufficient grounds to determine that bad debts are receivable:

- Receivables which have been overdue for 06 months or more (calculated according to the original repayment term under economic contracts, loan agreements or other debt commitments, regardless of the grace period) debt between parties), the enterprise has sent debt verification or urged the payment but has not yet recovered the debt.

- Undue receivable debts, but the enterprise has collected evidences to determine that the debt subject is unable to repay the debt on time as prescribed at Point c, Clause 2 of this Article.

- Particularly for debts purchased from a debt trading enterprise (with business registration and debt trading activities in accordance with the law), the overdue time is counted from the date of transfer of creditors rights. parties (on the basis of the minutes or notice of the handover of the creditors) or according to the nearest commitment (if any) between the debtor enterprise and the debt trading enterprise.

2. Level of appropriation:

a) For overdue receivables, the level of provision is as follows:

- 30% of the value for debts overdue from 6 months to less than 1 year.

- 50% of the value for debts overdue from 1 year to less than 2 years.

- 70% of the value for debts overdue from 2 year to less than 3 years.

- 100% of the value for a receivable debt of 3 years or more.

b) For enterprises providing telecommunications services and goods retailing enterprises, debts receivable from telecommunications services, information technology, postpaid television and receivable debts from retail goods in the form of deferred payment / installment payment of individual debtors that are overdue as follows:

- 30% of the value for debts overdue from 3 months to less than 6 months.

- 50% of the value for debts overdue from 6 months to less than 9 months.

- 70% of the value for debts overdue from 9 months to less than 12 months.

- 100% of the value for a receivable debt of 12 months or more.

c) For receivable debts which are not yet due but the enterprise has collected evidences to identify that the economic organization has gone bankrupt, has opened bankruptcy procedures, and has fled from the place of business; the debtor is being prosecuted, detained, tried by law enforcement, is serving a sentence or suffering from a serious illness (certified by the hospital) or has died or the debt has been ordered by the enterprise serving sentences but unable to be performed due to the debtor fleeing his / her residence; if the debt has been sued by the enterprise for debt collection but the case has been suspended, the enterprise shall self-estimate the amount of irrecoverable loss (maximum equal to the value of the debt being monitored in the accounting book) for making deductions. preventive.

3. At the time of making annual financial statements, if the receivable debts are determined as bad ones, the enterprise must set up a provision according to the provisions of this Article and the following provisions:

a) If the amount of the provision which is required to set up is equal to the balance of the provision for doubtful debts already made in the previous year's report recorded in the accounting book, the enterprise must not make additional provision for doubtful debts. claim.

b) If the amount of provision to be set up is higher than the balance of the provision for doubtful debts made in the previous year's report recorded in the accounting books, the enterprise shall additionally make such difference and record it in the accounting books. expenses for the period.

c) If the amount of provision to be set up is lower than the balance of the provision for doubtful debts made in the previous year's report recorded in the accounting books, the enterprise shall reverse the difference and record a reduction in expenses. fees for the period.

d) The enterprise must anticipate the likely loss level or the overdue debt age of the debts and conduct a provision for each of doubtful debts, together with evidence proving that bad debts as above. After setting up a reserve for each doubtful debt, the enterprise shall sum up the entire debt reserve into the detailed list as a basis for accounting into its expenses.

d) For debt purchase of debt trading enterprises, based on the debt purchase and handling plan and the principles of provisioning in this Circular to make a provision, the maximum number of provisions will be made is equal to the amount of money spent by the enterprise to buy the debt, the maximum time to set up does not exceed the time of enterprise restructuring, debt recovery in debt purchase and handling plan.

e) The enterprise fails to make provision for receivable debts that are overdue due to profits and dividends due to its capital contribution to other enterprises.

g) When making a provision for doubtful debts of a debt subject that incurs both receivable and payable debts, based on the record of debt comparison between the two parties so that the enterprise makes a provision on the basis of the remaining amount to be collected after clearing the liabilities of this subject.

The level of provisioning for each overdue debt is calculated according to the ratio (%) of overdue debts that must be set aside according to the specified time limit multiplied by (x) the total outstanding debts after offsetting the payable debts. pay.

For example: Company A has incurred sales transactions for Company B under each contract and is overdue for payment as follows:

+ Selling a shipment under 01 contract to Company B, the contract value is 5 million, Company B has not paid the debt, it has been overdue for the month.

+ Selling a shipment under 02 contract to Company B, the contract value is 15 million, Company B has not paid the debt, it has been overdue for the month.

+ Selling a shipment under 03 contract to Company B, the contract value is 10 million, Company B has not paid the debt, it has been overdue for the month.

- Total overdue receivables of Company B: 30 million VND.

– At the same time, Company A has purchased goods from Company B, the amount Company A must pay to Company B is: 10 million VND.

- Thus, the outstanding amount receivable after clearing the payable debt to Company B is: VND 20 million.

– The level of provision for receivables of shipment under contract 01 is: 5/30 x 20 million dong x 30% = 1 million dong.

– The level of provision for receivables of shipment under contract 02 is: 15/30 x 20 million dong x 50% = 5 million dong.

– The level of provision for receivables of shipment under contract 03 is: 10/30 x 20 million dong x 70% = 4,67 million dong.

4. Financial handling of irrecoverable receivables:

a) Unrecoverable receivable debts are those that are overdue or not yet due in one of the following cases:

- The debt subject is the enterprise or organization that has completed the bankruptcy in accordance with the law.

- The debt subject is the enterprise or organization that has ceased operation or dissolved.

- The debt subject has been decided by a competent authority to write off the debt in accordance with the law.

- Subjects of debt are individuals who have died or are being prosecuted, detained, tried by law enforcement bodies, or are serving sentences.

- The remaining difference of irrecoverable debts after the individual or collective liability has been handled must make material compensation.

- Receivables 100% of the provision has been set aside in accordance with Point a, Point a, Clause 4 of this Article, but after 2 years from the time when the enterprise has fully appropriated 03% of the provision, has not yet recovered. be in debt.

- Receivables 100% of the provision has been set aside as prescribed in the 4th dash, Point b, Clause 2 of this Article, but after 01 year from the time the enterprise has fully appropriated 100% of the provision, has not yet recovered. be in debt.

b) Unrecoverable receivable debts specified at Point a, Clause 4 of this Article, when there are sufficient supporting documents, are as follows:

- Accounting books, vouchers and documents proving that the debt has not been recovered by the time of debt settlement, the enterprise is recording receivables on the enterprise's accounting books such as economic contracts; loan contract; debt commitment; Contract liquidation (if any); debt comparison (if any); written request for debt comparison or debt collection document sent by the enterprise (with postmark or confirmation of the delivery unit); statement of debt and other related documents.

- For economic organizations:

+ The debtor has gone bankrupt: there is a court decision declaring the bankruptcy of the enterprise according to the Bankruptcy Law.

+ Debtors who have stopped operating or dissolved: there is a written confirmation or written notice / notice on the official website of the agency establishing the enterprise or its business registration organization or institution. tax authorities directly managing the suspension or dissolution of enterprises or organizations; or the debt has been sued by an enterprise or organization to a court in accordance with the law, has a court judgment or ruling and there is a certification of the judgment execution agency that the debtor has no property to test. judgment

+ For debts that are receivable but the debtor has been decided by a competent authority to write off the debt in accordance with law; the difference in damage shall be decided by the competent authority to sell the debt.

- In case of individuals:

+ Death certificate (certified copy or copy from the original book) or certification of local authorities for the debtor who has died.

+ Wanted order; or certification by law of the debtor has fled; or certification by law authorities that the debtor is no longer in his / her residence place for receivable debts of telecommunications, information technology and television services of telecommunications service-providing enterprises. ; or being prosecuted, serving a sentence.

- Documents and documents proving that 100% of the provision for receivables has been made according to the provisions of the 4th bullet point, point a, clause 2 of this Article, which after 03 years from the time the enterprise makes a full deduction of 100 % of provision but still cannot recover debts or receivable debts have been set up 100% of provision as prescribed in bullet point 4, point b, clause 2 of this Article that after 01 year from the time the enterprise makes provision 100% of the provision has yet to be recovered.

c) Financial handling:

- The actual loss of each irrecoverable debt is the difference between the receivable debt recorded in the accounting books and the recovered amount (compensated by the person causing the damage, from the sale of the property of the person who caused the damage. creditors or debtors, due to the division of property by decision of a court or other competent authority).

- The actual loss value of an irrecoverable debt, the enterprise uses the bad debt reserve (if any) to compensate, the difference is not accounted for in the enterprise's expenses.

- Irrecoverable receivable debts after having a decision to handle as prescribed above, the enterprise must track down in the corporate governance system and present in the notes to the financial statements during the period. the deadline is at least 10 years from the date of handling and to continue to take measures to recover the debt. If the debt is recovered, the recovered amount, after subtracting the expenses related to the debt recovery, the enterprise shall record it into its income.

d) When dealing with receivable debts irrecoverable, enterprises must compile the following documents:

- Minutes of the enterprise's debt settlement council. In which, clearly stating the value of each debt receivable, the value of debt recovered and the actual damage (after deducting recovered amounts).

- A detailed list of receivable debts written off as a basis for accounting. Accounting books, vouchers and documents proving that the debt has not been recovered, by the time of debt settlement, the enterprise is recording the receivable debt on the enterprise's accounting books.

- Documents and documents related to the implementation of provisions related to irrecoverable debts.

d) Competence to handle debts:

The Board of Directors, Board of Members, Company President, General Director, Director, owners of private enterprises and owners of economic organizations are based on the minutes of the Handling Council issued by the enterprise. make and evidence related to the debt to decide to handle the receivable debts are not recoverable and take responsibility for their decisions before the law. The composition of the Handling Council is decided by the enterprise itself.

Article 7. Provision for warranty of products, goods, services and construction works #

1. Objects and conditions for making provision: are products, goods, services, construction works performed by enterprises that have been sold, provided or handed over to buyers within the warranty period. and the enterprise is still obliged to continue to repair, complete, and provide warranty according to the contract or commitment with the customer.

2. Level of appropriation:

Enterprises estimate the loss level to make provision for warranty of products, goods, services, construction works consumed and services provided during the year and make a provision for each type of product. goods, services, construction works with warranty commitments.

Total amount of provision for warranty of products, goods, services and construction works as committed with customers but must not exceed 05% of total sales in the year for products, goods and services. goods, services and not more than 05% of the contract value for construction works.

3. After making a provision for each type of product, goods, service, or construction work, the enterprise shall summarize the entire provision in a detailed list. The detailed list is the basis for accounting in the enterprise's expenses in the period.

4. At the time of making annual financial statements, based on the situation of consumption and handover of products, goods, services, construction works and warranty commitments in the contract or other relevant regulations. Agencies and enterprises shall make provisions according to the provisions of Clauses 1, 2 and 3 of this Article and the following provisions:

– If the provision to be set up is equal to the balance of the provision for warranty of products, goods, services and construction works already made in the previous year's report recorded in the accounting books, the enterprise is not allowed to make such provision. supplement the provision for warranty of products, goods, services and construction works.

– If the provision to be set up is higher than the balance of the provision for warranty of products, goods, services and construction works already made in the previous year's report recorded in the accounting books, the enterprise shall make additional the difference is added and recognized as an expense in the period.

– If the provision to be set up is lower than the balance of the provision for warranty of products, goods, services and construction works already made in the previous year's report recorded in the accounting books, the enterprise shall make a full refund. Enter that difference and record the decrease in expenses for the period.

– After the warranty period expires, if the products, goods, services, construction works are not covered by the warranty or the backup number must be returned to the warranty of the products, goods, services, or construction works. actual expenses incurred, the remaining balance will be refunded to the income in the period of the enterprise.

Chapter III

TERMS ENFORCEMENT

Article 8. Enforcement

1. This Circular takes effect from October 10, 10 and applies from fiscal year 2019.

2. Annul the Circular No. 228/2009/TT-BTC dated December 07, 12 of the Ministry of Finance guiding the setting up and use of provisions for devaluation of inventories and loss of financial investments. principal, bad debts and warranties for products, goods, construction works at the enterprise; Circular No. 2009/34/TT-BTC dated March 2011, 14 of the Ministry of Finance amending Circular No. 3/2011/TT-BTC dated December 228, 2009; Circular No. 07/12/TT-BTC dated June 2009, 89 of the Ministry of Finance amending and supplementing Circular No. 2013/28/TT-BTC dated December 06, 2013 and other documents providing for tax deductions. setting up and using provisions contrary to the provisions of this Circular.

3. Provisions are made at enterprises operating in a number of specific fields (insurance, securities, capital investment and business, debt trading, retail sale of goods on deferred payment/ installment payment). ) shall comply with the guidance in this Circular and comply with separate regulations (if any) suitable to the specific characteristics under the guidance of the Ministry of Finance.

4. State-owned enterprises and enterprises with 100% charter capital invested by state-owned enterprises that transform into joint-stock companies shall handle provisions in accordance with the law on equitization.

5. The balance of provision for offshore investments that enterprises have made up to before the effective date of this Circular (if any) is reversed and recorded as a decrease in expenses at the time of making annual financial statements. 2019.

In the course of implementation, if any problems arise, they should be promptly reported to the Ministry of Finance for study, supplementation and amendment./.