Proposed guidelines on accounting for government grant to compliance with international accounting standards

rates). Similarly, grants related to fixed assets with a depreciation amount will have to be recorded equivalent to the depreciation amount recorded on business reports. 31 Grants related to fixed assets that are not calculated with depreciation might be involved in conducting some liabilities and are recorded in business reports in the periods where expenses arise to perform those responsibilities. For example: Enterprises that are given the right to use the land under the condition of having to construct a building onto that land, so the recording of the grant is conducted during the period relating to the construction of the building. In some cases, grants are a part of the financial or fiscal supporting package, with many conditions attached. In these cases, it is crucial to carefully examine the identification of conditions that make expenses arise to determine periods to record grants. It would be suitable if a grant can be distributed one part according to one approach and one part after another approach. A governmental grant is an amount receivable when the compensation for expenses or losses arise or for the purpose of supplying direct financial supporting amount for enterprises without the arising of related expenses in the future will be recorded in the period that it was noted as an amount receivable. In some cases, a governmental grant with an aim to supply enterprises with a direct financial supporting amount rather than encouraging the conduct of specific expenses. These grants are meant for certain enterprises, the case of which has to be recorded in the revenue of the period that enterprises have obtained sufficient conditions to receive grants and be presented clearly for the influence of grants to be rightfully understood. A governmental grant could be an amount receivable of enterprises to compensate for expenses or losses that arose in prior periods. These grants are recorded in revenue in the period when the grant is noted as an amount receivable. Forthly, the governmental grant is not in cash A governmental grant could be the exchange of assets rather than in cash like the authority to use land or other resources for an enterprise to use. In these cases, such assets are identified with reasonable value and grants as well as assets are accounted according to the rational value. In some cases, enterprises record the grant according to the nominal value. 5.1.4 Presenting the grants related to assets Governmental grants that are related to assets, including assets not in cash which are identified with rational values, according to IAS 20, will be presented on balance sheets: (i) like a delayed revenue or (ii) deducted from the value of assets. The case when grants are recorded as delayed amount of revenue and distributed logically throughout the time the assets have beneficial usage. For example, enterprises are funded by the government for the construction project, account payable 3387/ account 5114. 5.1.5 Presenting grants about revenue Grants related to revenue, according to IAS 20, enterprises present on business reports into a separate revenue objective about grants, price supports or in the target “Other revenue” or are deducted to related expenses. 32 5.1.6 Returning Governmental grants The returning of a governmental grant is accounted as a change in accounting estimates. Returning a grant related to revenue is initially recorded as a deduction in delayed revenue that was recorded before but at the returning time the grant was not fully distributed. If the amount of grant payable is larger than the undistributed delayed revenue or there is no undistributed delayed revenue, the paid amount of grant is recorded immediately in business reports. The returning of the grant related to an asset is recorded by recording depreciatively the undistributed delayed revenue with an equal amount to the amount payable. Compound depreciation supposed to be recorded in business reports until the day when grants are discontinued has to be recorded right in business reports. 5.1.7 When presenting financial statements, enterprises must present: - The accounting policy applied for governmental grants, including the presenting approach applied in business reports - The nature, the scope of governmental grants recorded in business reports and other supporting types from the government from which enterprises benefit directly. - Conditions obtained and unreached during the period to receive governmental assistance grants and other amounts related to governmental supports that have been recorded. 5.2 The need to conduct research on guidelines for accounting to reflect accounting principles and approaches applied to governmental grants 5.2.1 Common principles - Governmental grants are governmental supports in the form of delivering resources for enterprises under the condition that enterprises have to conform to several conditions by the government which relate to enterprises‘ business activities. - Governmental grants will not be recorded until there is certain insurance that: + The enterprise has conformed to all conditions to earn the grant; + Will definitely earn the grant. - Grants will be recorded as revenue from governmental grants logically throughout the subsidizing time in a suitable way to expenses that these grants compensate for. Enterprises are not allowed to record grants directly as owner’s equity. 5.2.2 Methods to account governmental grants - Grants to establish long-term assets (like subsidizing for construction or shopping projects), including grants not in cash, will be recorded and presented on the balance sheet like a revenue that has not been conducted. When enterprises receive the grant in cash, accountants will note down: Account 111, 112 Payable Having account 3387 33 The grant will be distributed into periodical subsidized revenue in a way that is appropriate to the depreciation time of fixed assets that are built or bought like a condition of the grant, when distributing, write: Account 3387 Payable Having account 5114 he basis for the above way of recording is that governmental grants to establish long- term assets have to be recorded in revenue that is not formed of enterprises and distributed gradually into revenue in accounting periods appropriate with business production expenses that these grants compensate for. - The case when the government subsidized with cash to compensate for expenses like interest rates supports after investment that enterprises have spent during the period will be recorded immediately in the revenue in the period that expenses arise, accountants will note: Account 112 Payable Having account 5114 If the disbursement is performed in the following period because time is needed to finish administrative procedures for the disbursing amount and enterprises ensure all conditions to obtain the disbursement, the grant is recorded as a receivable, accountants will note: Account 1388 Payable Having account 5114 When the enterprise earns the governmental grant, accountants will note: Account 112 Payable Having account 1388 - In the case when enterprises are subsidized under the form of a land lease reduction or exemption in a certain amount of time, enterprises have to identify the reasonable value of the amount of land lease fees that was reduced or exempted, and record the supports according to the identified value of the amount subsidized. Recording the reduced land rental fees: Account 242 Payable Having account 3387 Periodically enterprises have to distribute the amount of land rental fees reduced or exempted into expenses and distribute the value of the governmental grant into revenue to determine business outcomes of each period: + When distributing land rental fees, noting down: Accounts 627, 642 Payable Having account 242 + At the same time, distributing the governmental grant: Account 3387 Payable Having account 5114 34 The basis for this guideline is when enterprises use the land, they have to pay rental fees. If this amount of rental is reduced or exempted, enterprises have earned revenue from having reduced, exempted land rental fees, so the reduced or exempted amount need to be recorded periodically in business reports to reflect the amount of revenue generated by having reduced or exempted rental fees. At the same time, enterprises‘ expenses need to be reflected sufficiently to be able to compare with other enterprises in the same field but are not receiving the preferential of land rental fees reduction or exemption. Above are several proposals of guidelines on how to account governmental grants and present information about governmental grants; these ideas of proposals are personal opnions aiming to solve the problem more scientifically and reasonably, appropriate with the nature of subjects and principles of recording and presenting information on financial statements. 6. Conclusion The above are some guiding proposals for accounting for government subsidies and present information on current government subsidies. Hopefully, in the near future the Ministry of Finance needs to conduct research and publish accounting standards and instruct how to account governmental grants and present information about governmental grants in such a way that matches IAS 20. These principles are the basis for enterprises to uniformly conduct accounting methods as well as sufficiently present information about governmental grants and supports. From there, financial statements readers have enough information about the influence of governmental grants on the financial condition and financial outcomes of enterprises 7. References: Ministry of Finance (2014), Circular No. 200/2014/TT-BTC, published on 22/12/2014, Hanoi. 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