Perfecting fixed asset accounting to enhance fixed asset management in Vietnamese construction enterprises

and enterprise management, but the organization and application of management accounting in practice are in many different scopes, levels and contents. In terms of macro management, the State issues accounting regimes, financial regimes and circulars guiding the organization of accounting work in enterprises. The enterprise accounting regime is built, amended and perfected on the basis of international practices, economic and social development conditions of Vietnam, meeting the information needs for state management and serving enterprise management. Vietnam's enterprise accounting regime is a mixed system, with both elements of financial accounting and management accounting. The element of financial accounting is based on the mandatory accounting regime on vouchers, accounts, accounting books and financial statements, enterprises process arising economic transactions and establish a financial reporting system to serve the information needs of the enterprise and external entities. The elements of management accounting in the Enterprise Accounting System include: Group of accounts for production cost accounting and cost price calculation (Accounts 621, 622, 623, 627); Cost allocation methods;

guidance on vouchers, accounting books, accounting reports. For a long time (before July 2006), Vietnam did not have any document guiding the organization of management accounting work in enterprises. Enterprises encountered many difficulties in organizing the apparatus, content and methods of implementing management accounting. Based on a survey of enterprises, referring to foreign experience and opinions of accounting experts, the Ministry of Finance issued Circular No. 53/2006/TT-BTC dated June 12, 2006 on guidance on the application of management accounting in enterprises.

Management accounting in general, fixed asset management accounting in particular in construction enterprises

is carried out in many different contents, scopes and levels, depending on the interests of the enterprise's leaders, the information needs of the management and the level of the accounting staff. In fact, the accounting apparatus in construction enterprises today mainly processes and provides information on financial accounting. The provision of information for internal management of the enterprise is done by each accounting department or general accounting in the financial accounting apparatus.

Management accounting information processed and provided in construction enterprises mainly includes: Construction cost reports; Construction cost - revenue - results reports; Analysis of actual implementation compared to estimates... In terms of fixed asset management accounting, construction enterprises have not applied appropriate methods.

such as: Net present value method NPV, internal rate of return method IRR... to advise management to make decisions on fixed asset investment in accordance with the financial conditions of the construction enterprise and optimize economic efficiency. During the process of using fixed assets, the monitoring and provision of information on quantity, type, quality, and technical status of fixed assets are the responsibility of the technical department or mechanical department. Construction enterprises currently calculate a number of indicators related to equipment and use of fixed assets such as: Proportion of fixed assets in total assets; Profit margin on revenue; Profit margin on total assets and Profit margin on equity. However, these indicators are only calculated at the end of the year to serve the preparation of Notes to the financial statements of construction enterprises.

Thus, although not yet organized systematically and tightly, fixed asset management accounting in construction enterprises has partly met the information needs for internal management of construction enterprises, contributing to a certain extent to the management efficiency and business effectiveness of construction enterprises.

Above is the current status of fixed asset accounting in Vietnamese construction enterprises in both financial accounting and management accounting aspects. To have an overall view, from there

To evaluate and propose improvements in accounting to strengthen fixed asset management, it is necessary to evaluate the current status of management and use of fixed assets in Vietnamese construction enterprises.

2.4. Current status of management and use of fixed assets in Vietnamese construction enterprises

2.4.1. Fixed asset management in construction enterprises

Fixed assets are an important part of assets, accounting for a large proportion of total assets.

affecting the quality and efficiency of construction enterprises, construction enterprises are very interested in asset management in general and fixed asset management in particular. A survey of construction enterprises under LICOGI Construction and Infrastructure Development Corporation; Song Da Corporation; Thang Long Construction Corporation; Urban Infrastructure Development Corporation; Vietnam Construction Investment and Import-Export Company Constrexim and a number of construction companies under the Ministry of National Defense shows that fixed asset management has the following characteristics:

- The Accounting Department is responsible for monitoring and reflecting the current situation and fluctuations of each type of fixed assets and all fixed assets of the enterprise according to value criteria. For large-scale construction enterprises with a relatively systematic management organization, the Motorcycle Department or the Mechanical Department is responsible, while for small-scale construction enterprises, the Technical Department or the fixed asset usage department is responsible for monitoring and managing fixed assets in terms of physical objects, quantity, technical condition, and operating capacity of fixed assets and developing and promulgating standards and norms in the management and use of fixed assets. There is a close relationship between the Accounting Department and these departments in the investment, liquidation, sale, repair, and transfer of fixed assets.

- The authority to approve investment, liquidation, sale and transfer of fixed assets in construction enterprises is implemented according to the scale of assets. Accordingly, if the investment value or liquidation or sale is greater than 20% of the total asset value recorded in the financial statements of the construction enterprise, it shall be approved by the governing body, the General Meeting of Shareholders or the Board of Members; if the value is equal to or less than 20% of the total asset value, it shall be approved by the Board of Directors or the Director.

- The decision on the expected time of use to calculate depreciation of fixed assets for enterprises with a board of directors belongs to the board of directors, and for enterprises without a board of directors, it belongs to the board of members or the director of the enterprise. The authority to decide on the number of periods to allocate major repair costs of fixed assets to production and business expenses belongs to the chief accountant and director of the enterprise.

- The responsibility for managing fixed assets at the construction site is assigned to the construction site commander based on the director's decision to transfer fixed assets and the handover minutes between the enterprise and the construction site. Based on the enterprise's production and business plan and the construction site's fixed asset usage needs, the Mechanical Department or the Technical Department shall request the director to approve the transfer of fixed assets.

- In case of liquidation or sale of fixed assets, for independent enterprises, the supervisor

The Director of the Enterprise establishes a Council consisting of: Director; Chief Accountant; representative of the Economic and Planning Department, representative of the Technical Department or Mechanical Department, representative of the department using fixed assets. For enterprises under the Corporation, the liquidation and sale must be inspected by the Mechanical - Materials Department or the Technical Department in coordination with the Accounting Department.

Report to the Board of Directors for decision. The liquidation and sale price is approved by the Director of the Company based on the proposal of the Liquidation and Sale Council.

- For fixed asset repair, at the beginning of each year, the units and departments using fixed assets in the enterprise are responsible for checking the technical condition and quality of fixed assets, making plans for regular repairs, major repairs and fixed asset upgrades. The Mechanical Department or Technical Department synthesizes the fixed asset repair plan for the entire enterprise, submits it to the director for approval as a basis for managing fixed asset repair work during the year. When carrying out repairs, based on the request of the department using fixed assets and the inspection results of the Mechanical Department or Technical Department, the director approves the repair decision. Based on the settlement of repair costs, the accountant records the entire amount or gradually allocates it.

All are included in production and business expenses or recorded as an increase in the original value of fixed assets depending on the type of repair.

- For auxiliary and temporary works associated with the construction of each specific project, construction enterprises currently record them as prepaid expenses and periodically allocate them to construction and installation production costs. When the project is completed, the value of the auxiliary and temporary works is fully allocated and is a cost item in the total cost of the construction project. When liquidating auxiliary works, the proceeds from the liquidation are temporarily recorded as an increase in other income.

- Fixed assets specialized for a project, construction contract in construction enterprises include two cases, which are: Fixed assets are common but currently the construction enterprise itself does not have them, due to the requirements of construction works, the construction enterprise must invest and fixed assets are specialized, constructed specifically for a project, the construction enterprise must order from the manufacturer, manufacturer. For the first case, fixed assets are managed, used and depreciated as for other fixed assets, when the construction work is completed, the fixed assets

that can be used again or liquidated, transferred and sold. For special fixed assets, construction enterprises only decide to invest when there is acceptance of payment of the entire value of the equipment by the investor. If the project has funding from the state budget, it must

approved by a competent state agency, in special cases by the Prime Minister (for example, Son La Hydropower Project), the value of special fixed assets will be

Fully depreciated into the value of the construction project, when construction is completed, the fixed assets are liquidated, the recovered value is recorded as an increase in other income of the construction enterprise.

2.4.2. Efficiency of fixed asset use in construction enterprises

After a certain period of business operations, usually a year, analysis and

Evaluating the efficiency of asset use in general, and the efficiency of fixed asset use in particular, in enterprises plays a very important role. It helps managers at all levels to check and review the decisions and management policies that have been issued and implemented reasonably and effectively as expected, thereby making investment decisions, changing the structure of assets, capital sources, credit policies, payments and measures to manage and use assets to achieve the highest economic efficiency. Through actual surveys and data collection of construction enterprises under LICOGI Construction and Infrastructure Development Corporation; Song Da Corporation; Thang Long Construction Corporation; Urban Infrastructure Development Corporation; Vietnam Construction Investment and Import-Export Company Constrexim and a number of construction companies under the Ministry of National Defense, the author of the thesis analyzed the situation of equipment and efficiency of fixed asset use in construction enterprises on the following main aspects:

Firstly , the depreciation coefficient of fixed assets in construction enterprises is relatively high, generally ranging from 0.4 to 0.5; in particular, Constrexim Mechanical Construction Joint Stock Company in 2006 had a depreciation coefficient of 0.38. This shows that fixed assets in construction enterprises are slow to be invested in, innovated and modernized, and many fixed assets that have been fully depreciated are being used for production and business activities. In the long term, this result will affect the construction capacity, competitiveness, bidding and development of construction enterprises.

Table 2.7: Fixed asset depreciation coefficient of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	0.49	0.31	0.41	0.54
2	Constrexim Construction	0.074	0.19	0.28	0.38
3	Thang Long Bridge 5	0.41	0.39	0.48	0.55
4	Company 789	0.35	0.37	0.42	0.42

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Second , about the fixed asset investment rate of construction enterprises. Fixed assets in construction enterprises often account for 10 to 20% of the total asset value and fluctuate frequently, it depends a lot on the characteristics of operations, financial capacity, needs and other forms of fixed asset use. With the characteristics of operating in the field of special material production such as construction enterprises, this ratio is not really reasonable. However, because construction activities are affected by weather and are seasonal, this asset structure can be

bring risk dispersion to construction enterprises.

Table 2.8: Fixed asset investment rate of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	19.26%	45.1%	37.75%	34.29%
2	Constrexim Construction	29.15%	22.88%	16.3%	12.71%
3	Thang Long Bridge 5	21.04%	21.78%	15.45%	12.78%
4	Company 789	16.06%	12.31%	8.53%	7.12%

Third , about the fixed asset self-financing ratio of construction enterprises. In general, most construction enterprises have a low fixed asset self-financing ratio, usually below 50%, and Company 789 has a very high ratio. Construction enterprises with large fixed asset investment needs but slow capital replenishment speed will lead to a low fixed asset self-financing ratio. A low fixed asset self-financing ratio shows that fixed assets are invested mainly with external capital and the enterprise is under pressure from the burden of interest. The fixed asset self-financing ratio of some construction enterprises can be considered in Table 2.9:

Table 2.9: Fixed asset self-financing ratio of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	43.44%	10.85%	12.94%	25.07%
2	Constrexim Construction	53.45%	61.54%	83.72%	102%
3	Thang Long Bridge 5	18.37%	18.51%	21.18%	33.86%
4	Company 789	125.98%	133%	156.91%	152.82%

However, when considering the rate of self-financing of fixed assets, it is necessary to calculate the rate of return on equity capital. If the rate of return after corporate income tax on equity capital is equal to or higher than the bank's lending rate, the enterprise still achieves economic efficiency. Result

Collecting actual data from a number of construction enterprises shows that the return on equity is relatively high.

positive, usually over 10%.

Table 2.10: Return on equity of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	13.33%	19.2%	11.92%	8.07%
2	Constrexim Construction	7.6%	19.7%	15.6%	14.7%
3	Thang Long Bridge 5	8.54%	-	0.55%	7.5%
4	Company 789	7.91%	8.85%	10.72%	12.75%

Fourth , about the productivity of fixed assets in construction enterprises. Actual survey results show that the productivity of fixed assets in construction enterprises tends to increase gradually, 1 dong of fixed asset value generates over 2 dong of net revenue (In 2005, according to the Statistical Yearbook, this indicator of construction enterprises nationwide was 2.1).

Table 2.11: Productivity of fixed assets of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	7.5	2.8	2.06	2.35
2	Constrexim Construction	9.44	6.06	6.57	9.43
3	Thang Long Bridge 5	3.18	2.36	2.48	3.19
4	Company 789	6.73	7.73	9.39	11.49

Fifth , about the profitability of fixed assets. In general, this indicator is not consistent.

between different years in a construction enterprise and between different construction enterprises in the economy, it depends on the value of fixed assets, cost structure and revenue of each enterprise. For the most part, 1 VND of fixed asset value creates more than 0.1 VND of profit for the construction enterprise.

Table 2.12: Profitability of fixed assets of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	0.094	0.047	0.021	0.025
2	Constrexim Construction	0.12	0.17	0.18	0.20
3	Thang Long Bridge 5	0.022	0	0.0015	0.032
4	Company 789	0.15	0.17	0.23	0.28

Sixth , about the depreciation rate of fixed assets in construction enterprises. This indicator in construction enterprises tends to decrease, reflecting the increasingly positive efficiency of using fixed assets. To gain 1 dong of profit, construction enterprises often have to invest from 10 to 40 dong of fixed asset value.

Table 2.13: Fixed asset depreciation rate of some construction enterprises from 2003 - 2006

Construction company	2003	2004	2005	2006
1	LICOGI 12	10.64	21.16	46.65	40.32
2	Constrexim Construction	8.38	5.85	5.67	4.92
3	Thang Long Bridge 5	45.02	-	656.7	30.92
4	Company 789	6.69	6.03	4.33	3.50

The above analysis shows that the efficiency of fixed asset use in construction enterprises has gradually improved over the years, reflected in the productivity, the profitability of fixed assets tends to increase, the depreciation rate of fixed assets tends to decrease, except for some construction enterprises that are in the process of converting the form of ownership and perfecting the organization of production and business management activities. In fact, construction enterprises currently do not pay due attention to organizing the analysis of business performance in general and the efficiency of fixed asset use in particular. Most construction enterprises only calculate a number of analytical indicators to serve the preparation of the Financial Statement Explanation at the end of the year and the preparation of Bidding Documents when participating in bidding for construction works. This is one of the shortcomings that construction enterprises need to overcome in the coming time.

2.5. Assessment of the current status of fixed asset accounting in Vietnamese construction enterprises

2.5.1. Results achieved

In the process of conducting production and business activities, construction enterprises have flexibly and creatively applied the State's accounting and financial regime in general business management, and the accounting and financial regime for fixed assets in particular. The application of the accounting and financial regime for fixed assets by construction enterprises is relatively suitable to the characteristics of their operations.

characteristics of the management organization and information needs of the enterprise. This is what affects