Characteristics and Standards for Recognizing Fixed Assets

2.4. Fixed asset accounting

2.4.1. Characteristics and criteria for identifying fixed assets

Fixed assets (FA) are the main means of labor that create the necessary technical and material basis in public administrative units, ensuring that these units operate normally and complete the tasks assigned by the State. FA participates in career activities as well as production and business activities with the following characteristics:

- Fixed assets are assets of great value and have a long time of participation in the operation of the public service unit.

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- Fixed assets participate in many business cycles but do not change their original physical form from the time they are used until the time the asset is damaged.

- During the process of participating in the activities of the public service unit, fixed assets are depreciated, causing their value and usage value to gradually decrease.

An asset is considered a fixed asset if it satisfies the following criteria:

+ Usage time from 1 year or more.

+ Assets of great value according to financial regulations in each period.

For tangible fixed assets (TFA), they are assets with physical form, independent structure, or a system of many separate asset parts linked together to perform one or several specific functions, simultaneously satisfying both time and value criteria as prescribed.

For intangible fixed assets (TFA), they are assets that do not have a specific physical form and that agencies and units must invest costs in creating, such as: Land use rights value, patents, computer software, industrial designs, utility solutions, copyrights..., satisfying both standards as prescribed for tangible fixed assets.

In addition to the general standards mentioned above, according to the current financial regime, in some cases, there are assets in public service units that do not meet the above two standards but are still classified as fixed assets:

- Assets not in the group "Houses and structures": machinery and equipment, means of transport and transmission, management equipment and tools, working animals, livestock, perennial trees, special assets, other fixed assets with an original price from 5 million VND to less than 10 million VND and a usage period of over one year, are defined as fixed assets.

- Assets whose real value cannot be assessed (called special assets), but require strict management in terms of physical objects (objects displayed in museums, mausoleums, historical sites, etc.), are defined as fixed assets.

- Assets with an original value of 10 million VND or more but are easily damaged or broken (glassware, porcelain, etc.) are not considered fixed assets, except for laboratory and scientific research equipment.

- In addition to the above provisions, ministries, ministerial-level agencies, government agencies, other central agencies, and People's Committees of provinces and centrally run cities, based on the characteristics of their assets, may prescribe additional assets that do not meet the criteria for being fixed assets.

Particularly for revenue-generating public service units, similar to production and business units, fixed assets are means of labor that must meet the criteria for recording fixed assets according to current financial regulations.

2.4.2. Classification of fixed assets

Fixed assets include many types, with different properties, characteristics, uses and different formation processes, so the management requirements are also different. In the process of managing and using fixed assets at agencies and public service units, fixed assets can be classified according to the following criteria:

2.4.2.1. Classification by structure

a. Tangible fixed assets

- Houses and structures: Including offices, warehouses, clubhouses, cultural houses, sports training and competition houses, museums, nurseries, kindergartens, schools, lecture halls, dormitories, hospitals, clinics,... infrastructure works such as bridges, roads...

- Machinery and equipment: including computers, printers, water filters, dehumidifiers, audio-visual equipment, data storage equipment, fire prevention and fighting equipment, tables and chairs, cabinets, safes, etc. Machinery and equipment used for specialized work such as machine tools, measuring and analytical equipment, laboratory equipment, etc.

- Means of transport and transmission: including road means of transport (cars, motorbikes, scooters, other road means of transport); water means of transport (canoes, motorboats of all kinds; ships of all kinds; boats of all kinds, other water means of transport); air means of transport (airplanes of all kinds),...

- Management equipment and tools: Tables, chairs, cabinets, shelves for storing documents,...

- Working animals, animals raised for research or product collection, perennial plants, ornamental gardens, fruit trees, rockery.

- Special assets: Museum artifacts, antiques, works of art, books, tombs, historical relics,...

- Other fixed assets: are assets not specified above, mainly specific fixed assets such as works of art, books, scientific and technical newspapers in libraries and books for professional purposes, exhibits in museums...

b. Intangible fixed assets

- Land use rights value;

- Patent value;

- Value of copyright, industrial designs, utility solutions;

- Computer software value.

2.4.2.2. Classification by method of asset formation

- Fixed assets formed by purchase;

- Fixed assets formed by basic construction investment;

- Fixed assets granted or transferred;

- Fixed assets are donated.

2.4.2.3. Classification by source of formation

- Fixed assets formed from budget funds.

- Fixed assets are transferred according to the decision of the competent authority.

- Fixed assets sponsored and donated by domestic organizations and individuals.

- Fixed assets are aided by non-project or project.

- Fixed assets formed from permitted career revenue and revenue from sale, transfer, and liquidation of assets.

- Fixed assets formed from career development funds and welfare funds.

- Fixed assets formed from mobilized capital, joint ventures, and associations according to the provisions of law.

2.4.2.4. Classification by purpose of use

- Fixed assets used for administrative and career activities.

- Fixed assets used for program, project and topic activities.

- Fixed assets used for production, business and service activities.

- Fixed assets awaiting disposal (no longer usable or needed).

2.4.3. Fixed asset valuation

There are many different types of fixed assets, formed from many different sources, but in general, fixed assets must be strictly managed in terms of both physical and value, monitoring the increase and decrease of each type of asset, each department using the asset; must strictly manage the use of assets and depreciation of fixed assets during the process of fixed assets participating in the unit's activities. Fixed assets management must follow 3 criteria of asset value, which are original price, accumulated depreciation and remaining value of fixed assets.

Based on the characteristics and management requirements of fixed assets during use, fixed assets are evaluated according to the initial value of the asset (original price) and the value after initial recording.

a. Determine initial value - Original price of fixed assets

The original price of a fixed asset is the actual initial value of the fixed asset. Determining the original price of a fixed asset depends on the source of the fixed asset formation. Fixed assets in a public service unit can be formed by purchase, completed investment in construction, granted, transferred, sponsored, donated, etc.

According to current financial regulations, the original price of fixed assets is determined in each specific case as follows:

a1. Determine the original price of tangible fixed assets

* The original price of fixed assets formed from purchases (including newly purchased fixed assets and used fixed assets) is determined as the actual purchase price (price recorded on the invoice minus (-) trade discounts or rebates - if any) plus (+) transportation, loading and unloading costs, repair, renovation, upgrading costs, installation and testing costs minus (-) recoveries of products and scrap from testing plus (+) taxes, fees and charges (if any) that the agency or unit must pay up to the time the fixed assets are put into use;

Particularly for the case of fixed assets purchased for use in the production and business of goods and services subject to VAT calculated according to the deduction method, the original price of the fixed assets includes: the purchase price (excluding VAT) plus (+) transportation, loading and unloading costs, upgrading costs, installation costs, testing costs, taxes and registration fees, etc.

* Original price of fixed assets formed from construction investment: is determined as the final settlement value of the construction project approved by the competent authority according to the provisions of the current Investment and Construction Management Regulations plus (+) other directly related costs and registration fees (if any).

For fixed assets that are working animals, ornamental animals and animals that produce products, and perennial gardens, the original price of the fixed assets is all actual and legal expenses incurred for the animals and gardens from the time of formation until they are put into operation and use, and other related expenses and registration fees (if any).

* Original price of fixed assets granted or transferred: is determined as the value of the asset recorded in the "Minutes of handover of transferred assets" or the value according to the actual assessment of the Handover Council plus (+) transportation, loading and unloading costs, repair, renovation, upgrading costs, installation and testing costs minus (-) recovered products and scrap from testing plus (+) taxes, fees and charges (if any) that the agency or unit must pay up to the time the fixed asset is put into use.

* Original price of donated, aided, sponsored, donated fixed assets: is determined as the value of the asset calculated by the financial agency as the basis for accounting or the value re-evaluated by organizations with the function of appraising state assets and agreed upon by the financial agency at the same level plus (+) transportation, loading and unloading costs, repair, renovation, upgrading costs, installation and testing costs minus (-) recovered products and scrap from testing plus (+) taxes, fees and charges (if any) that the agency or unit must pay up to the time the fixed asset is put into use;

* Original price of special assets : Conventional price is used as the basis for accounting entries. Conventional price is regulated by specialized ministries and ministerial-level agencies.

a2. Determine the original price of intangible fixed assets

* Land use right value : For land allocated with land use fee collection; land with legal land use right transfer; land leased for which land rent has been paid for the entire lease term, the land use right value is determined as the land use fee payable when the State allocates land with land use fee collection or the amount paid when receiving legal land use right transfer or the land rent paid in one lump sum for the entire lease term plus (+) taxes, fees, and charges (if any).

In case land is allocated without land use fee collection, the value of land use rights is determined according to current regulations on determining the value of land use rights to calculate into the asset value of organizations.

Land allocated by the state without land use fees plus (+) taxes, fees, and charges (if any).

* Patent value : The costs that agencies and units must pay for research and trial production projects that are granted patents by the State or units that purchase patent copyrights from domestic and foreign researchers.

* Value of copyright, industrial design, utility solution: Is the total amount of remuneration paid to the author and recognized by the State for the author's exclusive right to publish and sell his work.

* Computer software value: Is the amount paid for programming or purchasing computer software according to the unit's programs (when recording and managing using computers).

For the value of donated computer software: the original price is determined as the value of the asset calculated by the financial authority as the basis for accounting or the value re-evaluated by organizations with the function of appraising state assets and agreed upon by the financial authority at the same level.

b. Determination of value after initial recognition

After initially recording fixed assets at original cost, during use, fixed assets are always determined at original cost, accumulated depreciation and residual value.

Remaining value of fixed assets = Original price of fixed assets - Accumulated depreciation

In addition, the original cost of fixed assets may change in some cases after initial recognition such as:

- Re-evaluate fixed asset value according to decision of competent state agency.

- Incurring costs that are recorded as increasing the original value of fixed assets, which certainly increase future economic benefits from the use of that asset. Costs for renovation, major repairs of fixed assets, dismantling one or several parts for the purpose of upgrading fixed assets will be capitalized into the value of fixed assets; when the investment process ends, the repair work

Repair to increase the functionality or extend the original usage time of the fixed asset.

When changing the original price of fixed assets, the unit must make a record clearly stating the basis for the change and re-determine the original price, remaining value, and accumulated depreciation of fixed assets in the accounting books and conduct accounting according to current regulations.

In all cases of increase or decrease of fixed assets, it is necessary to prepare a "Fixed Asset Delivery Record", properly and fully carry out procedures according to State regulations, and prepare and complete fixed asset records in terms of accounting.

2.4.4. Fixed asset accounting method

2.4.4.1. Fixed asset accounting

a. Accounting documents

All fixed assets in a public service unit must have their own set of records and must be monitored, managed, used, and depreciated in accordance with regulations, including:

- Contracts and invoices for purchasing fixed assets.

- Minutes of delivery and receipt of fixed assets (Form No. 50 - HD).

- Minutes of liquidation of fixed assets (Form No. C51 - HD).

- Minutes of revaluation of fixed assets (Form No. C52 - HD).

- Fixed asset inventory record (Form No. C53 - HD).

- Other relevant documents.

b. Accounting account

The main account used is account 211 - Tangible fixed assets: Used to reflect the current value and fluctuations of fixed assets in the unit at original price.

Content and structure of account 211 - Tangible fixed assets:

Debit: Original price of tangible fixed assets increased due to:

- The original price of tangible fixed assets increases due to purchase, completion of construction and handover into use, grants, sponsorship, gifts, donations, and aid.

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