Vietnamese Public Accounting Standard No. 31 “Intangible assets” under Decision 1676/QD-BTC dated September 01, 9

APPENDIX NO.05

VIETNAM PUBLIC ACCOUNTING STANDARD NO.31 Intangible Assets
(Attached to Decision No. 1676/QD-BTC dated September 01, 09 of the Ministry of Finance)

INTRODUCTION

Vietnam's public accounting standards system has been researched and developed by the Public Accounting Standards Board of the Ministry of Finance to ensure compliance with international accounting practices and conditions. reality of Vietnam. Vietnamese public accounting standards have the same standard symbols as the corresponding international public accounting standards.

Vietnam Public Accounting Standard (VPSAS) No. 31 "Invisible treasure"Drafted based on International Public Accounting Standard (IPSAS) No 31"Invisible treasure” and current regulations on financial and budgetary mechanism of Vietnam. Vietnam Public Accounting Standard No. 31 stipulates the contents consistent with current Vietnamese legal regulations and regulations that may be amended and supplemented in the near future. Vietnam Public Accounting Standard No. 31 does not stipulate that the contents of International Public Accounting Standard No. 31 are not suitable for the long-term financial and budgetary mechanism, the addition of regulations will be made on the basis of according to the actual situation in each appropriate period.

The International Public Accounting Standard No. 31 is based on the 2010 edition, revised to be consistent with other international public accounting standards as of December 31, 12, by the Accounting Standards Board. International Public Accounting (IPSASB) promulgated.

Vietnam Public Accounting Standard No. 31 denotes the ordinal number of paragraphs compared to international public accounting standards. For comparison, the reference table of paragraph symbols of Vietnamese public accounting standards compared with the notation of international public accounting standards paragraphs is included with this standard. For matters related to other public accounting standards, Vietnam Public Accounting Standard No. 31 quoted by symbol and name of relevant Vietnamese public accounting standards has been promulgated. For standards that have not been issued, this standard only mentions the name of the standard or related content to be referenced, not the number of the relevant standard as in the international public accounting standard No. 31. Specific citation of the symbol and the standard name will be made after the relevant standards are issued.

By the time of promulgation of Vietnam Public Accounting Standard No. 31 (in 2021), relevant standards that have not been promulgated include:

VPSAS 31 – Intangible Assets

The process of promulgating and updating Vietnamese public accounting standards No. 31
(hereinafter referred to as the Standard)

The version of Vietnamese public accounting standards No. 31 was first issued under Decision No. 1676/QD-BTC dated September 01, 09 of the Minister of Finance.

This Standard takes effect from September 01, 09, and will be applied from September 2021, 01.

Commonly valid standards include:

– Vietnamese Public Accounting Standard No. 01: Presentation of financial statements

– Vietnamese Public Accounting Standard No. 02: Statement of cash flows;

– Vietnamese Public Accounting Standard No. 12: Inventory;

– Vietnam Public Accounting Standard No. 17: Real Estate, Plant and Equipment.

VP SAS 31 – Intangible Assets
CONTENT

The text of Vietnamese Public Accounting Standard No. 31 “Intangible assets” is presented in paragraphs 1 to 108. All paragraphs are equally authentic.

Reference table of paragraphs of Vietnamese public accounting standards compared with paragraphs of international public accounting standards

I. GENERAL PROVISIONS

Purpose

1. The purpose of this standard is to prescribe the accounting method for intangible assets that are not specifically mentioned in other Vietnamese public accounting standards. This Standard requires an entity to recognize an intangible asset if and only if certain specific criteria are satisfied. This Standard also specifies how the value of intangible assets is determined and specific disclosure requirements for intangible assets.

Limit

2. The entity that prepares and presents financial statements on the basis of accrual accounting applies this standard to accounting for intangible assets.

3. This Standard applies to accounting for intangible assets, except:

(a) Intangible assets covered by another standard;

(b) Financial assets;

(c) How to recognize and determine the value of assets arising from the exploration and evaluation of mineral resources;

(d) Expenses for the development and exploitation of minerals, oil, natural gas and similar non-renewable resources;

(e) Powers and rights conferred by law, constitution or similar legal documents;

(f) Deferred tax assets;

(g) For intangible heritage. However, the disclosure requirements of paragraphs 101 to 108 should apply to inscribed properties.

4. If another Vietnamese public accounting standard prescribes the accounting method for a specific type of intangible asset, the entity should apply that Vietnamese public accounting standard instead of this standard. , For example, this Standard does not apply to:

(a) Intangible assets held by the entity for sale during the normal operating cycle (see Vietnamese Public Accounting Standards on Construction Contracts, and Vietnamese Public Accounting Standards No. 12).Inventory");

(b) Leased assets fall within the scope of Vietnamese public accounting standards on leases;

(c) Assets arising from employee interests (see Vietnamese Public Accounting Standards on Employee Interests);

(d) Financial assets as defined in Vietnamese Accounting Standards on Financial Instruments: Presentation. The recognition and valuation of a number of financial assets are covered by Vietnamese Public Accounting Standards on separate financial statements, consolidated financial statements, investments in associates, Venture; and

(e) Recognition and initial valuation of the service franchising asset within the scope of Vietnamese public accounting standards on franchising agreements: Franchisor. However, this Standard applies to the post-initial recognition and disclosure determination of such assets.

5. Some intangible assets may be contained in or on physical entities, such as CDs (in the case of computer software), legal documents (in the case of licenses or licenses). inventions), or movies. To determine an asset including both intangible and tangible elements, it should be accounted for according to Vietnamese Public Accounting Standard No.Real estate, plant and equipment” or accounted for as an intangible asset under this standard, an entity should make a judgment to determine which is more important. For example, aircraft control software is an integral part of the aircraft and is accounted for as property, plant and equipment. The same accounting method also applies to computer control software systems. When software is not an integral part of the hardware involved, computer software is accounted for as an intangible asset.

6. This Standard applies to advertising, training, initiation, research and implementation costs. Research and implementation activities to develop knowledge. Thus, although these activities may produce an asset with a physical form (e.g. a prototype), the physical element of the asset plays a secondary role in comparison to the intangible component. knowledge contained in that asset.

7. In the case of a finance lease, the original assets can be tangible or intangible. After initial recognition, the lessee is required to account for the intangible assets in the finance lease in accordance with this standard. Licensing rights to assets such as movies, videotapes, plays, scripts, patents and copyrights are covered by this standard.

8. Circumstances not covered by this standard may occur if the activity or transaction is so special that they give rise to accounting requirements that should be handled differently.

Invisible legacy

9. This Standard does not require an entity to recognize intangible assets even if they meet the definition and recognition criteria for intangible assets. If an intangible asset is recognized, the disclosure requirements of this standard shall apply and may, but are not required, the determination provisions of this standard.

10. Certain intangible assets are considered heritage because of their cultural, environmental or historical significance. Examples of intangible heritage include records of important historical events and the right to use an image of an important person on postage stamps or commemorative coins. Intangible legacies often exhibit certain characteristics, including the main ones listed below:

(a) The cultural, environmental and historical value of these properties cannot be fully reflected in the financial value determined solely on the basis of market value;

(b) The law prohibits or severely restricts the sale of these properties;

(c) The property's value may increase over time; and

(d) It is difficult to estimate the useful life of these assets, up to several hundred years in some cases.

11. Public sector entities can hold large amounts of intangible heritage that has been received over the years and in a variety of ways, including acquisition, donation, inheritance and confiscation. These assets are rarely held for economic purposes and there may be social or legal barriers to their use for economic purposes.

12. Some intangible assets, in addition to their value, have potential future economic or service benefits, for example royalties paid to entities for the use of historical records. In these cases, the intangible estate can be recognized and measured on the same basis as other cash-generating intangibles. For other intangible assets, the value of potential future economic benefits or services is limited by their heritage characteristics. The existence of both future economic benefits and potential services may influence the choice of the basis of valuation.

13. The disclosure requirements in paragraphs 101 to 105 require an entity to disclose information about recognized intangible assets. Therefore, intangible asset registers must present information about these assets in such aspects as:

(a) The basis of valuation to be applied;

(b) The method of depreciation applied, if any;

(c) Original cost;

(d) Accumulated depreciation at the end of the period, if any; and

(e) A balance sheet reconciliation at the beginning and the end of the period, showing certain items.

Definitions

14. The terms in this Standard are construed as follows:

Residual value is the value of the asset recognized after deducting accumulated depreciation.

Depreciation is the systematic allocation of the depreciable value of an intangible asset over its useful life.

Research is an original and planned search conducted to gain new scientific or technical knowledge and understanding.

An intangible asset is an identifiable non-monetary asset that has no physical form.

Implementation is the activity of applying research results or knowledge to a plan or design to create new or improved materials, devices, products, processes, systems or services. basic before starting production or use.

Terms defined in other Vietnamese Public Accounting Standards as used in this Standard have the same meanings as in those Standards.

Invisible treasure

15. Entities often spend resources, or borrow money, to acquire, develop, maintain, or enhance intangible resources such as technological or scientific knowledge, process design and implementation, new systems, licenses, intellectual property rights and trademarks (including trademarks and publication titles). Common examples of the above categories are computer software, patents, copyrights, feature films, service user lists, fishing permits issued, import quotas granted , and the relationship with the service user.

Possibility that can be determined

16. Not all of the items described in paragraph 15 meet the definition of an intangible asset, i.e. determineability, ability to control a resource, and existence of similar economic benefits. futures or potential services. If an item covered by this standard does not meet the definition of an intangible asset, expenditures to acquire or create the item should be recognized as an expense as soon as it is incurred.

17. An intangible asset is identifiable if it:

(a) Separable, which is the ability to be divided or segregated from the entity and sold, transferred, licensed, leased or exchanged, either separately or in conjunction with a contract , a identifiable asset or a related liability, whether or not the entity intends to do so; or

(b) arising from binding agreements (including contractual rights or other legal rights), whether such rights are assignable or severable from the entity or from other rights and obligations. other service or not.

18. For the purposes of this standard, a binding agreement is an agreement in which the parties are granted rights and obligations similar to those in the form of a contract.

Asset control

19. An entity controls an asset if it has the right to obtain future economic benefits or potential services from the asset and limits other entities' access to the benefits. or the potential service. The entity's ability to control future economic benefits or potential services from an intangible asset is generally derived from legally recognized rights. Proving control is more difficult in the absence of legal rights. However, the ability to enforce the law is not a necessary condition for control because the entity can control future economic benefits or potential services in another manner.

20. Scientific and technical knowledge can provide future economic benefits or potential services. An entity that controls such benefits or services when there is a binding legal right, such as copyright-protected knowledge, commercial agreement restrictions (where permitted), or legal obligation employees in keeping information confidential.

21. The entity may have a skilled workforce, and it may determine whether upskilling employees through training will result in potential future economic or service benefits. An entity can also expect that employees will continue to contribute those skills to the entity. However, the entity is often unable to control the future economic benefits or potential services provided by skilled personnel or training to satisfy the definition of an intangible asset. Likewise, technical or leadership talent does not satisfy the definition of an intangible asset, unless the asset is secured by a legal right to use or obtain future economic benefits or potential service from the asset, while also meeting other criteria in the definition.

22. An entity may have a list of customers using the service or a successful customer outreach rate and expect that, thanks to efforts in building relationships with customers, those customers will continue. continue to use its services. However, if an entity does not have the legal power or other means to control the relationship with its customers or the loyalty of those customers, it usually does not have sufficient control over these items. potential future economic or service benefits from customer relationships and loyalty (e.g., customer lists, market share or service success rates, customer relationships and loyalty) of customers using the service) to satisfy the definition of an intangible asset. In the absence of a legal right to protect these relationships, exchanges resulting from the same or similar relationships with customers that are not contractual can demonstrate that the entity nonetheless retains control over potential future economic benefits or services arising from the relationship with the customer. Because this exchange also provides evidence that the relationship with the service user is separable, these relationships meet the definition of an intangible asset.

Future economic benefit or potential service

23. Potential future economic benefits or services resulting from an intangible asset may include revenue from the sale of a product or service, cost savings, and other benefits resulting from the use of an intangible asset. use of the entity's assets. For example, the use of intellectual property rights in the production or provision of a service can save future production or service costs, improving service delivery rather than increasing future revenue. (Online registration allows citizens to renew their driver's licenses more quickly, resulting in reduced staff costs needed to perform this function and speeding up processing.)

II. SPECIFIED

Recognition and valuation

24. Recognition of an item as an intangible asset requires an entity to demonstrate that the item meets:

(a) Definition of intangible assets (see paragraphs 15-23); and

(b) Asset recognition criteria (see paragraphs 27-29).

This provision applies to the historical cost of assets determined at the time of recognition (the historical cost in an exchange transaction or the historical cost of an internal-generated intangible asset, or the contractual value of the asset). management of an intangible asset acquired through a non-exchange transaction) and the subsequent costs incurred to add, replace, or service it.

25. Paragraphs 32 to 39 provide for the application of recognition conditions to separately acquired intangible assets. Paragraphs 42-43 provide for the initial determination of intangible assets obtained through non-exchange transactions, paragraphs 44-45 provide for the exchange of intangible assets, and paragraphs 46 to 48 regulations on the recognition of goodwill generated from within the entity. Paragraphs 49 to 64 provide for the initial recognition and valuation of internally generated intangible assets.

26. In many cases, intangible assets cannot be supplemented or partially replaced. Therefore, most costs incurred after recognition of an intangible asset are intended to maintain the future economic benefits or potential services associated with the asset, rather than to meet the definition of intangible asset, and the asset recognition criteria in this standard. In addition, it is often more difficult to calculate post-recognition costs for a specific intangible asset directly than for the entity's operations as a whole. Therefore, it is rare that costs incurred after the initial recognition of an intangible asset acquired or created internally by the entity are recognized in the asset's value. As required by paragraph 60, subsequent costs for trademarks, labels, publication titles, consumer lists, and items of a similar nature (purchased externally or internally generated) is always recognized in a surplus or deficit in the period in which it is incurred. This is because these expenses cannot be distinguished from other expenses in the operation of the entity.

27. An intangible asset is recognized if and only if:

(a) It is probable that future economic benefits or services will flow to the entity from the asset; and

(b) The historical cost or fair value of the assets can be reliably measured.

28. An entity must assess the likelihood that it will be probable that future economic benefits or potential services will be generated from the asset, using reasonable and well-founded assumptions that represent the entity's best estimate of the future economic benefits. economic conditions that will exist over the useful life of the asset.

29. An entity should use judgment to assess it is probable that future economic benefits or potential services will be generated from the use of an asset, on the basis of evidence available at the time of entry. initial recognition, where external evidence is more important.

30. An intangible asset is initially measured at cost in accordance with paragraphs 32 to 43. In the case of an asset received through a non-exchange transaction, its cost at the date of acquisition. The point of receipt is determined at the fair value at the date of receipt.

31. Land use right is an intangible asset whose value is determined according to the State's regulations; the recording and presentation of information comply with this standard.

Buy separate property

32. Generally, the price paid by an entity to acquire a particular intangible asset will reflect expectations about the entity's ability to obtain future economic benefits or potential services from the asset. Thus, the entity expects to realize future economic benefits or potential services, even if the timing and amount of the benefits are uncertain. Therefore, the recognition criteria for certainty in paragraph 27(a) must be satisfied when purchasing the intangible asset separately.

33. In addition, the cost of a separately acquired asset can often be reliably measured, particularly when the asset is purchased with cash or other monetary assets.

34. The historical cost of a separately purchased asset includes:

(a) The purchase price of the property, including import duties and taxes on the purchase of the property, is non-refundable or non-deductible, after deductions for trade discounts and rebates; and

(b) Expenses that are directly attributable to making the asset available for its intended use.

35. Some examples of direct costs for intangible assets:

(a) Employee costs incurred directly in connection with bringing the asset to operational readiness;

(b) Expert costs incurred directly in connection with bringing the asset to a ready state for operation; and

(c) The cost of a test run to check whether the asset is in good working order.

36. Some examples of expenses that are not included in the cost of an intangible asset:

(a) The cost of introducing a new product or service (including advertising and promotion costs);

(b) The cost of expanding the business in a new location with a new customer segment (including staff training costs); and

(c) Administrative and other general expenses.

37. Cost recognition of an intangible asset must cease when the asset is in the required state and ready to operate as intended by the entity. Therefore, costs incurred in using or re-exploiting an asset are not included in the cost of the asset. For example, the following costs are not included in the cost of an intangible asset:

(a) Expenses incurred when the asset has become capable of performing for the purposes of the entity but has not yet been put into use; and

(b) Initial operating losses, such as those incurred during the product planning phase of an asset.

38. Certain activities are associated with the deployment of an intangible asset, but do not necessarily bring the asset to the operational readiness state intended by the entity. These activities may arise before or during the deployment of the asset. These activities do not necessarily bring an asset to a ready state, so the revenue and associated costs of these activities are recognized in revenue and expenses during the period.

39. If an asset is paid for by the deferred payment method, the historical cost of the asset is the cash equivalent purchase price of the asset if paid immediately. The difference between the immediate purchase price and the total amount of the deferred payment method is recognized as interest expense during the deferred payment period, unless such interest is recognized in the asset value in accordance with the provisions of law. The capitalization method is accepted in accordance with the provisions of Vietnamese public accounting standards on borrowing costs.

Expenses incurred after acquiring a project that is in the process of research and implementation

40. The following research or development expenses must be accounted for according to the provisions of paragraphs 52 -59:

(a) Relates to an ongoing research or development project that is purchased separately and recognized as an intangible asset;

(b) arising after the date of acquisition of the project;

41. The application of paragraphs 52-59 means that the following costs incurred by a project in the research or development stage are purchased separately and have been recognized as an intangible asset when:

(a) It is recognized as an expense as soon as it is incurred if it is a research expense;

(b) It is recognized as an expense immediately when incurred if it is a implementation cost that does not meet the intangible asset recognition criteria under paragraph 55; and

(c) It is included in the cost of the purchased research or development project if it is a development cost that meets the recognition criteria for intangible assets under paragraph 55.

Intangible assets received through non-exchange transactions

42. In some cases, intangible assets may be acquired through a non-exchange transaction. This can happen when an entity is transferred intangible assets in a non-exchange transaction, such as the right to land at an airport, a license to operate a radio or television station, a license to import imports or access to other limited resources. A citizen as an individual may will in his will leave his or her personal documents, including copyright in their publications, to the national archives (an entity in the field of public) in a non-exchange transaction.

43. In these cases, the historical cost of the asset is its fair value at the date of receipt.

Asset exchange

44. An entity may acquire one or more intangible assets through an exchange for one or more non-monetary assets or a combination of both monetary and non-monetary assets. The provisions below refer only to the exchange of one non-monetary asset for another, however, also apply to all exchanges mentioned above. The cost of an intangible asset received is its fair value unless the fair value of the asset received and exchanged cannot be reliably determined. The cost of the asset received is determined in this way even if the entity cannot immediately write off the exchangeable asset. If it is not possible to determine the historical cost of the property received at fair value, it must be determined according to the carrying amount of the exchanged assets.

45. Pursuant to paragraph 27(b), one of the conditions for recognizing an intangible asset is that the cost of the asset can be reliably determined. The fair value of an intangible asset in the absence of comparable market transactions for the asset can be measured reliably if:

(a) Estimates of the fair value of the asset do not differ significantly; or

(b) The likelihood of different estimates can be appropriately evaluated and used to estimate fair value.

If an entity is able to reliably determine the fair value of the asset received or exchanged, the fair value of the exchanged asset is used to determine the cost of the asset. property received, unless there is clearer evidence of the fair value of the property received.

Commercial advantage created from within the unit

46. ​​Goodwill created within the entity is not recognized as an asset.

47. In some cases, some costs are incurred to generate future economic benefits or potential services, but do not create an intangible asset that meets the recognition criteria in this standard. . These costs are generally considered to contribute to goodwill from within the entity. Goodwill generated internally by an entity is not recognized as an asset because it is not an identifiable resource, is not separable from, nor arises from binding agreements (including contractual or other legal rights) that are controlled by the entity and can be reliably measured.

48. The difference between the market value of an entity and the carrying amount of the entity's identifiable net assets at any point in time can cover a range of influencing factors to the unit value. However, these differences do not reflect the cost of intangible assets controlled by the entity.

Intangible assets created from within the entity

49. Several obstacles make it difficult to assess whether an internally generated intangible asset meets the recognition criteria:

(a) It is difficult to determine whether a particular asset will provide a future economic benefit or potential service and when it is likely to generate such future economic benefit or potential service; and

(b) It is difficult to determine the historical cost of the asset reliably. In some cases, the costs of creating an intangible asset internally within the entity cannot be separated from the costs to maintain or enhance goodwill internally or to maintain the day-to-day operations of the entity. .

Therefore, in addition to complying with the general requirements for recognition and initial valuation of an intangible asset, an entity must apply the requirements and guidance in paragraphs 50 to 64 to all all intangible assets created within the entity.

50. To assess whether an internally created intangible asset meets the recognition criteria, an entity must classify the asset formation process into the following stages:

(a) Research stage; and

(b) Implementation phase.

The terms “research phase” and “implementation phase” have broader meanings than the terms “research” and “implementation” for the purposes of this International Standard.

51. If an entity is unable to separate the research and development phases of an internal project to create an intangible asset, the entity must account expenditures for that project in the period. as the cost of the research phase.

Research stage

52. Intangible assets are not recognized from research (or from the research phase of an internal project). Expenses for research (or for the research phase of an internal project) are recognized as expenses incurred during the period.

53. During the research phase of an internal project, an entity cannot demonstrate that an intangible asset that exists during this period could result in future economic benefits or potential services. Therefore, expenses in this period are recognized as expenses incurred in the period.

54. Examples of research activities are:

(a) Activities aimed at acquiring new knowledge;

(b) Seek, evaluate, and select or apply findings from research or other knowledge;

(c) Finding new materials, equipment, products, processes, systems or services; and

(d) Develop, design, evaluate, and select viable alternatives to new or improved materials, devices, products, processes, systems or services from existing ones.

Deployment phase

55. Intangible assets arising from implementation (or from the implementation phase of an internal project) are recognized when and only if the entity can satisfy all of the following conditions:

(a) The technical feasibility of completing the intangible asset to make it ready for use or sale;

(b) The entity intends to complete the intangible asset and use or sell it;

(c) The entity has the ability to use or sell the intangible asset;

(d) How the intangible asset will generate future economic benefits or potential services. In addition, the entity can demonstrate the existence of a market for the asset or for the products it produces, or the ability to use the asset internally and the usefulness of the intangible asset. ;

(e) Have sufficient technical, financial, and other resources to complete the implementation phase and use or sell the intangible asset;

(f) Be able to reliably determine the costs contributing to the intangible asset during the implementation phase.

56. During the implementation phase of an internal project, an entity may in some cases identify an intangible asset and demonstrate that it will provide future economic benefits or services. potential. This is because the implementation phase of a project is a more advanced stage than the research phase.

57. Implementation examples:

(a) Design, build and test models or prototypes prior to production or use.

(b) Design tools, jigs, molds, dyes according to new technologies;

(c) Design, construct, and operate a test plant or test facility that is not yet economically viable for commercial production or use in the provision of services;

(d) Design, build, and test a selected viable alternative for a new material, device, product, process, system or service, or an improvement from an existing one;

(e) Website costs and software development costs.

58. The availability of resources needed to complete, utilize, and benefit from an intangible asset can be represented by an operational plan that outlines the technical resources. technical, financial, and other resources needed and the entity's ability to secure these resources. In some cases, an entity can demonstrate the availability of external financing by obtaining confirmation of a sponsor's or lender's willingness to finance a project.

59. An entity's cost tracking and management system can often reliably determine the costs of creating an intangible asset internally, such as employee salaries and other expenses. other costs such as logo construction, licensing, licensing or computer software development costs.

60. Trademarks, labels, publication titles, service user lists and similar items created internally by the entity will not be recognized as intangible assets.

61. Expenses for trademarks, labels, publication titles, user lists and similar items generated internally by the entity cannot be distinguished from operating expenses. general movement of the entire unit. Therefore, these expenses are not recognized as intangible assets.

The cost of an intangible asset is created internally by the entity

62. The historical cost of an internally generated intangible asset as defined in paragraph 30 is the sum of all costs incurred since the date the intangible asset meets the recognition criteria in paragraphs 27 and 28. and 55. Paragraph 69 does not authorize the re-recognition of costs of intangible assets that were previously included in expenses.

63. The cost of an internally created intangible asset includes all direct costs necessary to create, produce, and prepare the asset to its intended operating state. unit determination. Examples of direct costs of creating an asset include:

(a) Cost of materials and services used or consumed in the creation of the intangible asset;

(b) Costs to employees arising from the creation of intangible assets;

(c) Fees for registration of legal rights; and

(d) Depreciation of patents and licenses used to create intangible assets.

Vietnamese Public Accounting Standards on Borrowing Costs stipulate criteria that allow interest expense to be recognized in the cost of assets.

64. The following expenses are not recognized in the historical cost of an intangible asset created internally by the entity:

(a) Administrative, selling and other general expenses, unless these costs are directly attributable to the preparation of the asset to its serviceable condition;

(b) Costs incurred as a result of identifiable weaknesses or initial performance deficits that occur before the asset reaches its planned level of performance; and

(c) The cost of training staff to be able to operate the property.

Record the cost

65. An expense for an intangible item is recognized as an expense as soon as it is incurred, unless it constitutes the cost of the intangible asset that meets the recognition criteria (see paragraphs). 24-64).

66. In some cases, costs incurred to bring future economic benefits or potential services to an entity, but no intangible asset or other asset acquired or created are recorded. take. In the case of the consumption of goods, an entity recognizes such expenditure as an expense when it has access to such goods. In the case of service consumption, the entity recognizes such expenditure as an expense when receiving the service. For example, research costs are recognized as costs as they are incurred (see paragraph 52). Some other examples of expenses that are recognized as expenses as soon as they are incurred:

(a) Initial operating expenses (initial costs), unless such expenditures are included in the cost of the property, plant and equipment in accordance with Vietnamese Public Accounting Standard No. Initial costs may include establishment costs such as attorneys' fees, administrative costs incurred during the establishment of the unit, costs of opening a new facility or a new operation (prior to establishment costs). establishment), or the cost of starting a new activity or introducing a new product or process (pre-operational costs);

(b) Expenses for training activities;

(c) Expenses for advertising and promotional activities (including the cost of mailing leaflets and brochures); and

(d) Expenses for relocation or partial or complete restructuring of the entity.

67. The entity has access to the goods in their possession. Likewise, the entity has the right to access the goods when the goods are produced by the supplier in accordance with the terms of the contract, and the entity has the right to demand delivery upon payment. Services are received when they are performed by a supplier providing the entity under a service contract, and not when the entity uses the service to provide other services, for example to provide information. service information to service users.

68. Paragraph 65 does not prevent an entity from recognizing an advance as an asset when payment is made before the entity has access to the goods. Likewise, paragraph 65 does not prohibit an entity from recognizing an advance payment as an asset when payment is made before the entity receives such services.

Expenses incurred previously were not recognized as assets

69. An expense for an intangible item that is initially recognized as an expense under this standard shall not be re-recognized to the cost of the intangible asset thereafter.

Determine the post-initial recognition value at cost

70. Once recognized, an intangible asset is stated at cost less accumulated depreciation.

Useful time of use

71. An entity must assess whether the useful life of an intangible asset is finite or indefinite. If the useful life of an intangible asset is finite, the length of its useful life, or quantity of products or similar units of measurement, must be assessed. An intangible asset is considered to have an indefinite useful life when, based on an analysis of all relevant factors, there is no predictable limit to the length of time the asset is expected to be. ideas that can generate cash inflows or provide potential services to the entity.

72. Accounting for intangible assets is based on the useful life of that asset. An intangible asset with a finite useful life is amortized (see paragraphs 80-92), and an intangible asset with an indefinite useful life is not amortized (see paragraphs 93-94). XNUMX, XNUMX).

73. Factors affecting the determination of the useful life of an intangible asset, including:

(a) The intended use of the entity's assets and whether the assets are effectively managed by another management team;

(b) The characteristic product life of the asset and information on the estimated useful lives of similar assets used in a similar manner;

(c) Technically, technologically, commercially or otherwise backward;

(d) The stability of the asset's sector and changes in market demand for the asset's output products or services;

(e) The intended activities of current or potential competitors;

(f) The level of maintenance costs necessary to obtain the expected future economic benefits or potential services from the asset and the entity's ability and intention to pay these costs;

(g) The duration of the control of the property, legal or similar restrictions on the use of the property, such as the term for the termination of the relevant lease; and

(h) The dependence of the asset's useful life on the useful life of other assets in the entity.

74. The term “indefinite term” does not mean “infinite”. The useful life of an intangible asset reflects only the maintenance costs required to maintain the asset in standard operating condition as assessed at the time of estimated useful life of the asset. assets and the entity's ability and intention to pay these costs. The conclusion that the useful life of an intangible asset is indefinite should not depend on anticipated future costs in excess of what is necessary to maintain the asset in working condition. standard.

75. Due to rapid technological change, computer software and many other types of intangible assets easily become obsolete. As a result, these assets typically have a short useful life. A decrease in the expected future selling price of a product produced by an intangible asset is an indication of the technological or commercial obsolescence of the asset, and therefore may reflect a decrease in the benefits of the intangible asset. future economic or potential services to be derived from the asset.

76. The useful life of an intangible asset can be very long, even undetermined. Uncertainty allows the useful life of the intangible asset to be estimated on a conservative basis, but it does not permit the choice of an unrealistically short useful life.

77. The useful life of intangible assets arising from binding agreements (including contractual rights or other legal rights) must not exceed the term of the agreement but may be shorter. , depending on how long the entity intends to use the asset. If the agreement is binding for a term and can be extended, the useful life of the intangible asset will only include the extension period on the contract if there is evidence that the extension of the application is valid. taste is certain and does not incur significant costs.

78. Economic, political, social and legal factors may affect the useful life of intangible assets. Economic, political, and social factors determine the period over which an entity can obtain future economic benefits or potential services. Legal factors may limit the length of time for which the entity has control of the future economic benefit or potential service. The useful life is the shortest period determined by these factors.

79. The following factors enable an entity to renew binding agreements (including contractual or other legal rights) without incurring significant costs:

(a) There is evidence, possibly based on experience, that binding agreements (including contractual or other legal rights) will be renewed. If the extension is subject to the approval of a third party, there must be evidence that the third party will agree to the extension;

(b) There is evidence that all necessary conditions for renewal will be met; and

(c) The entity's costs for the renewal are insignificant when compared with the future economic benefits or potential services that the entity is expected to derive from the renewal.

Where the renewal costs are substantial when compared with the future economic benefits or potential services the entity is expected to derive from the renewal, the renewal costs are essentially the costs of acquiring an intangible asset. new image at the renewal date.

Intangible assets have a limited useful life

Depreciation time and method

80. The depreciable value of an intangible asset with a finite useful life must be allocated systematically over the useful life of the asset. Depreciation begins when the asset is ready for use, i.e. when the asset is in the location and condition necessary for it to function as intended. Depreciation ends on the date the asset is written down. The depreciation method must reflect the manner in which the entity intends to use the future economic benefits or potential services from the asset. If that method cannot be determined reliably, the entity should use the straight-line method of depreciation. Depreciation expense incurred in each period must be recognized in the surplus or deficit for that period, unless this Standard or other standards allow or require that depreciation expense be included in the value of an asset. other products.

81. There are a variety of depreciation methods that can be used to systematically allocate the depreciable value of assets over their useful lives. These methods include; straight-line depreciation, declining balance depreciation, and volume-based depreciation. The applicable depreciation method is selected on the basis of the manner in which future economic benefits or potential services will be generated from the use of the asset and is applied uniformly from period to period, unless there is a change. change in the manner in which an entity will obtain future economic benefits or potential services.

82. There is a disproved assumption that the method of depreciation based on the revenue generated from activities using intangible assets is not appropriate. Revenue generated from an activity using an intangible asset usually reflects factors other than directly the recovery of potential economic benefits or services from the intangible asset. For example, revenue is affected by inputs and processes, sales activities, and changes in sales and selling prices. The price factor in sales can be affected by inflation, which has nothing to do with how assets are used. This assumption can only be accepted in a limited number of cases such as:

(a) Intangible assets presented as a measure of the value of sales, as described in paragraph 84; or

(b) It can be demonstrated that revenue and the realization of potential economic benefits or services from the intangible asset are highly correlated.

83. When an appropriate depreciation method is selected in accordance with paragraph 81, an entity can determine the most conspicuous limiting factor inherent in the intangible asset. For example, a contract provides for the right to use the entity's intangible asset for a predetermined time, according to the number of units produced, or to the total fixed revenue generated. Determining the most discernible limiting factor may be the starting point for determining an appropriate basis of depreciation, but a different basis may be applied if that basis more closely reflects the potential economic benefits or services are expected.

84. Where the most conspicuous limiting factor inherent to an intangible asset is a certain level of sales, the revenue generated may be an appropriate amortization basis. For example, the right to operate a toll road may be based on the total fixed revenue generated from the accumulated tolls (the contract may allow the operation of the toll road until the accumulated toll level is reached). revenue reached 20.000 billion VND). Where revenue is the most conspicuous limiting factor in a contract for the use of an intangible asset, the revenue generated may be an appropriate basis for amortization of the intangible asset, provided the contract is valid. contract must determine the value of total fixed revenue from which to determine depreciation.

85. Depreciation expense in a period is normally recognized in the surplus or deficit for that period. However, in some cases, future economic benefits or potential services associated with an asset are used by the entity to produce other assets. In this case, the depreciation expense is part of the value of another asset and is included in the value of that asset. For example, depreciation of an intangible asset used in the production process is included in the value of the inventory (see VAS 12).

Recoverable liquidation value

86. The salvage value of an intangible asset with a finite useful life is considered to be zero, unless:

(a) There is a third party commitment to buy back the asset after its useful life; or

(b) There exists an active market for the asset, and:

(i) Liquidation value can be determined by reference in this market; and

(ii) It is likely that this market will exist at the end of the asset's useful life.

87. The depreciable value of an asset with a finite useful life is determined after deducting the asset's recoverable liquidation value. A liquidation value greater than zero means that the entity intends to dispose of the intangible asset before the end of the asset's economic life.

88. An estimate of the recoverable value of an asset based on the recoverable amount from the disposal of the asset, based on the selling prices available at the estimated date of the comparable assets. self has reached the end of its useful life and operates under similar conditions. The salvage value of assets should be reviewed at least every reporting period. Each change in the recoverable amount of an asset is considered a change in accounting estimates in accordance with Vietnamese Standards on Accounting for accounting policies, changes in accounting estimates, and misstatements. .

89. The salvage value of an intangible asset may increase to an amount equal to or greater than the carrying amount of the asset. In this case, the depreciation expense is zero, unless and until the recoverable amount of the asset is subsequently reduced to less than the carrying amount of the asset.

Review the amortization period and depreciation method

90. The timing and method of amortization of an intangible asset with a finite useful life must be reviewed at least each reporting period. If the estimated useful life of an asset changes from previous estimates, the depreciation period must also change accordingly. If there is a significant change in the manner in which future economic benefits or potential services from the entity's assets are used, the depreciation method must also change to accommodate this new use. These changes are considered changes in accounting estimates according to the provisions of Vietnamese public accounting standards on accounting policies, changes in accounting estimates and errors.

91. During the life of an intangible asset, it may become apparent at some point in time that the estimated useful life of the asset is no longer relevant.

92. The manner in which an entity obtains future economic benefits or potential services from an intangible asset may change over time. For example, it can be clearly seen that the application of the declining balance method of depreciation is more appropriate than the straight-line method of depreciation. Another example is that the use of rights granted under a license may be deferred until other planned activities of the entity are carried out. In this case, the entity can only realize potential economic benefits or services in later periods.

Intangible assets have an indefinite useful life

93. Intangible assets with indefinite useful life are not depreciated.

Consider re-evaluating the useful life

94. The useful life of a non-depreciable intangible asset must be reviewed at each reporting period to determine whether actual conditions are still appropriate for its unspecified useful life. determine the maturity of the asset. If it is no longer relevant, the useful life of the asset should be changed from indefinite to finite and accounted for as a change in the accounting estimate in accordance with the guidance in ISA. accounting policies, changes in accounting estimates, and errors.

Termination of use and liquidation

95. Intangible assets must be reduced when:

(a) Liquidation of assets (including through a non-exchange transaction); or

(b) When there are no longer future economic benefits or potential services from the use or disposal of the asset.

96. Gain or loss arising from a write-down of an intangible asset is determined as the difference between the net proceeds from the disposal, if any, and the carrying amount of the asset. This gain or loss must be recognized in the surplus or deficit in the period when the asset is written down (unless otherwise provided for by Vietnamese Public Accounting Standards on Leases regarding the sale of the asset and then rent).

97. The write-down of an intangible asset can take many forms (for example, sale, finance lease or through a non-exchange transaction). When determining when to write down assets, an entity must apply the standards in Vietnamese public accounting standards on revenue from exchange transactions to recognize revenue. Vietnamese Public Accounting Standard on Leases applies to the write-down of an asset by selling and then subleasing the asset itself.

98. According to the recognition principle in paragraph 27, if an entity recognizes the value of a replacement part to the cost of an intangible asset, it must write down the carrying amount of the replaced part. If the entity cannot determine the residual value of the replaced part, it may use the value of the replacement part as the basis for calculating the residual value of the replaced part when the part is replaced. acquired or created within the entity.

99. Receivables from liquidation of intangible assets are initially recognized at fair value. If assets are liquidated on a deferred basis, the receivable is initially recognized at the cash equivalent selling price if paid immediately. The difference between the immediate purchase price and the total amount of the deferred payment method is recognized as interest earned in accordance with the provisions of Vietnamese public accounting standards on revenue from exchange transactions.

100. Depreciation of an intangible asset with a finite useful life does not stop when the intangible asset is not in use, unless the asset has been fully depreciated.

Information presentation

Regulations

101. An entity must present the following information about each class of intangible assets, separating internally generated intangibles from other intangible assets:

(a) The useful life of the asset is either finite or indefinite, if finite, the useful life or the applicable depreciation rate shall be stated;

(b) The depreciation method applies to intangible assets with a finite useful life;

(c) Cost and accumulated depreciation at the beginning and end of the period;

(d) The items on the income statement include depreciation of the intangible asset;

(e) A reconciliation of the carrying amount of the assets at the beginning and the end of the period, showing the following information:

(i) The increase during the period, separating assets developed from within the entity, assets purchased separately;

(ii) Liquidation number;

(iii) Depreciation amount in the period;

(iv) Net exchange differences arising from the translation of the financial statements into the reporting currency, and the translation of the financial statements of an entity operating abroad into the reporting currency of the entity ; and

(v) Other changes in carrying amount of assets during the period.

102. Intangible asset group is a collection of assets with the same nature or usage in the operation of the entity. Examples of asset classes might include:

(a) Trademarks;

(b) Newspaper labels and publication titles;

(c) Computer software;

(d) License;

(e) Copyright, patent, industrial and service intellectual property rights and other operational rights;

(f) Formula, model, design, prototype; and

(g) Ongoing intangible assets.

The above asset groups can be separated (or aggregated) into smaller (or larger) groups to provide more relevant information to users of the financial statements.

103. Vietnamese Public Accounting Standards on accounting policies, changes in accounting estimates, and misstatements require an entity to disclose information about the nature and amount of a change in an accounting estimate. has a material effect in the current period or is expected to have a material effect in the following periods. This presentation may be required due to changes in:

(a) An estimate of the useful life of an intangible asset;

(b) Depreciation method; or

(c) Recoverable liquidation value.

104. An entity must also present the following information:

(a) For an intangible asset with an indefinite useful life, the carrying amount of the asset and the reasons for valuing the asset with an indefinite life. In stating these reasons, an entity must describe the factors that are important in determining the asset's useful life.

(b) An explanation of any intangible asset that has a material effect on the entity's financial statements, information about the carrying amount and the remaining amortization period of that asset.

(c) For intangible assets acquired through a non-exchange transaction and initially recognized at fair value (see paragraphs 42 – 43):

(i) The initial recognized fair values ​​of these assets; and

(ii) The carrying amount of these assets.

(d) The existence and carrying amount of intangible assets whose ownership is restricted and the carrying amount of the intangible assets pledged as security for debts.

(e) Value of commitments to purchase intangible assets.

105. When an entity describes the factors that are important in determining an asset with an indefinite useful life, it should consider the factors referred to in paragraph 73.

Research and implementation costs

106. An entity must disclose information about the total amount of research and development expenses recognized as expenses during the period.

107. Research and development costs include all expenditures that are directly related to the entity's research and development activities (paragraphs 63 and 64 provide guidance on the types of research and development costs). implementation should be presented in accordance with the disclosure requirements of paragraph 106).

Other information

108. Entities are encouraged but not required to present the following information:

(a) Interpretation of intangible assets that have been depreciated but are still in use; and

(b) A brief description of significant intangible assets that are controlled by the entity but are not recognized as assets because they do not meet the recognition criteria in this standard.

APPLICATION INSTRUCTIONS

This application guide is an integral part of Vietnamese Public Accounting Standard No. 31 .

Website costs

HD1. The unit may incur internal costs to deploy and operate its own website for internal use or to allow external access. Websites designed to allow external access can be used for a variety of purposes, for example to disseminate information, introduce services, request comments on draft legislation, promote and advertise. report on the entity's services and products, provide online services, and sell products and services. Websites designed for internal access may be used to store policies and details about service users, and to find relevant information.

HD2. The steps to deploy a website can be described as follows:

(a) Planning – including feasibility studies, defining objectives and characteristics, evaluating alternatives, selecting priorities;

(b) Applications and infrastructure – including purchasing domain names, purchasing and building hardware and software, installing applications, and testing scenarios;

(c) Develop graphic design, including designing the interface of web pages; and

(d) Content Creation – includes creating, purchasing, preparing and updating written or graphical information on the website prior to completion of construction of the website. This information may be stored in a separate database integrated with (or accessed from) that website or encrypted directly within the website.

HD3. Once the website construction is complete, the operational phase begins. During this phase, the unit maintains and improves the applications, infrastructure, graphic design and content of the website.

HD4. When accounting for internal costs for the implementation and operation of the company's website, the issues that need attention are:

(a) Whether the website is an intangible asset created internally by the entity in accordance with the provisions of this standard; and

(b) An appropriate method of accounting for such expenses.

HD5. This application guide does not apply to the cost of purchasing, implementing and operating the hardware (such as website servers, temporary servers, operational servers and internet lines) of a website. These expenses are accounted according to Vietnamese public accounting standard No. 17, In addition, when the entity pays for internet services for its website, such expenses are accounted as an expense in the period when the entity pays for its website. receive service.

HD6. Vietnam Public Accounting Standard 31 does not apply to intangible assets held by an entity for sale during the normal operating cycle (see Vietnamese Public Accounting Standards on Construction Contracts and Standards). 12) or for lease according to Vietnamese public accounting standards on lease of assets. Therefore, this application guide does not apply to expenses for the development or operation of a website (or website software) for sale to another entity. In case the website is sub-leased under an operating lease, the lessor shall apply this Guide. In case the website is leased under a financial lease, the lessee applies this Guide after the first recognition of the leased asset.

HD7. An entity's website developed for internal use or to allow external access is an internally generated intangible asset within the scope of this standard.

HD8. Websites acquired from implementation are considered intangible assets if and only if the entity meets the requirements of paragraph 55 of this standard, in addition to complying with the general provisions of paragraph 27 on recognition criteria. and determine the initial value of the property. In particular, the entity must demonstrate how the website will generate a potential future economic benefit or service as defined in paragraph 55(d) of this standard. For example, when the website has the ability to generate revenue, including direct revenue from ordering online, or providing services using that website without having to do it at a certain location and use Human. If the entity cannot demonstrate that the website was developed solely or principally for the purpose of advertising services and products that would provide a potential future economic benefit or service to the entity, then all Website implementation costs will be accounted as expenses as soon as they are incurred.

HD9. All internal expenses for the implementation and operation of the website of the entity are accounted in accordance with the provisions of this standard. The nature of each activity that generates costs (such as staff training, website maintenance) and the implementation and post-construction phases of the website must all be assessed to determine the appropriate accounting method. Eg:

(a) The planning phase is similar in nature to the research phase referred to in paragraphs 52-54 of this standard. Expenses incurred in this period are accounted as expenses immediately when incurred.

(b) Application and infrastructure development, graphic design and content development, as long as the content is built for purposes other than promotion and advertising an entity's products and services, which are similar in nature to the implementation phase described in paragraphs 55-61 of this standard. Expenses incurred in these stages are included in the historical cost of the website and accounted as intangible assets according to paragraph HD8 provided that these costs directly contribute and are necessary for the creation and construction of the website. or prepare the website to function according to the intention of the unit. For example, expenses to purchase or create content (other than advertising content and promoting the company's products and services) specific to a website, expenses for the use of content (licensing fees for copies, etc.) copy the contents) of that website, is included in the deployment cost if the conditions are satisfied.

(c) Expenses incurred during the content development phase, as long as the content is built to advertise and promote the entity's product offerings (digital photos of the product), are accounted for as costs as soon as they are incurred pursuant to paragraph 66(c) of this standard. For example, when accounting for expenses for digital photography services of a product and enhancing that product's image, it must be accounted for as soon as the service is received, not when the digital image is received. display on the website; and

(d) The operational phase begins as soon as the website implementation phase is completed. Expenses incurred during this period are accounted for as expenses as they are incurred unless the recognition criteria in paragraph 27 of this standard are met.

HD10. A website that is accounted for as an intangible asset pursuant to paragraph HD8 of these Guidelines is measured after initial recognition by applying the provisions of paragraph 70 of this standard. As described in paragraph 76, the useful life of a website is often short-lived.

HD11. The guidelines in paragraphs HD1-HD10 do not specifically apply to software implementation costs, but the principles in these paragraphs can also be applied by an entity.

Reference table of paragraphs of Vietnamese public accounting standards compared with paragraphs of international public accounting standards