Vietnam: Are bonds unlisted on the securities market considered trading securities? What is the accounting method for periodic interests of bonds?
Are bonds unlisted on the securities market considered trading securities in Vietnam?
What are bonds?
Bonds are securities that certify their holders’ lawful rights and interests to part of the debt of the issuer. (Clause 3, Article 4 of the Law on Securities 2019).
Are unlisted bonds on the market considered trading securities in Vietnam?
Referring to Clause 1, Article 15 of Circular 200/2014/TT-BTC:
Account 121 - Trading securities
1. Rules for accounting
a) This account is used to record the sales, purchases and payments of securities as prescribed which are held for business purposes (including over-12-month matured securities which are traded for profits). Trading securities include:
- Shares, bonds listed on securities market;
- Securities and other financial instruments.
This account is not used to record the held to maturity investment, such as: loans under agreements, cash in bank, bonds, commercial papers, treasury bills, exchange bills,…held to maturity date.
b) Trading securities must be recorded in the ledger according to original prices: buying prices plus (+) buying costs (if any) (brokerage, transactions, information provision, taxes, bank's fees and charges. The basis price of trading securities shall be determined according to fair value of payments at the time in which the transaction takes place the trading securities shall be recorded when the investors acquire ownership, in particular:
- Listed securities are recorded at the time of matching (T+0);
- Unlisted securities are recorded at the time in which the ownership is acquired as prescribed in regulations of law.
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Thus, bonds unlisted on the securities market are not trading securities in Vietnam.
What information is Account 1212 - Bonds in Vietnam used to record?
Account 1212 - Bonds is specified in Clause 2, Article 15 of Circular 200/2014/TT-BTC as follows:
Account 121 - Trading securities
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2. Structure and contents of account 121 – Trading securities
Debit: Trading security buying-value.
Credit: trading security selling-value.
Debit balance: Trading security value at the reporting time.
Account 121 - Trading securities, comprises 3 sub-accounts:
- Account 1211 – Shares: recording the purchases or sales of shares for profits.
- Account 1212 – Bonds: recording the purchases, sales and payments of bonds for profits.
- Account 1218 – Securities and other financial instruments: recording the purchases or sales of securities and other financial instruments as prescribed for profits, such as fund certificates, stock options, warrants, call options, put options, futures contracts, commercial papers, etc. This account also records the purchases or sales of other valuable papers including commercial papers or bill of exchange for profits.
Under the above regulations, Account 121 - Trading securities, comprises 3 sub-accounts:
- Account 1211 – Shares: recording the purchases or sales of shares for profits.
- Account 1212 – Bonds: recording the purchases, sales and payments of bonds for profits.
- Account 1218 – Securities and other financial instruments: recording the purchases or sales of securities and other financial instruments as prescribed for profits, such as fund certificates, stock options, warrants, call options, put options, futures contracts, commercial papers, etc. This account also records the purchases or sales of other valuable papers including commercial papers or bills of exchange for profits.
Thus, Account 1212 – Bonds is used to record the purchases, sales, and payments of bonds for profits.
What is the accounting method for periodic interests of bonds in Vietnam?
The accounting method for periodic interests of bonds in Vietnam is specified in Clause 3, Article 15 of Circular 200/2014/TT-BTC:
(i) When buying trading securities, according to buying costs (buying prices plus (+) costs of brokerage, transaction, information, bank fees or charges, etc), the following accounts shall be recorded:
Dr 121 – Trading securities
Cr 111, 112, 331
Cr 141 - Advance
Cr 244 - Pledge, mortgage, deposits.
(ii) When collecting interests of bonds and other securities periodically:
- If the received interests are used for purchases of additional bonds or treasury bills, the following accounts shall be recorded:
Dr 121 – Trading securities
Cr 515 – Financial income.
- When receiving interests in cash, the following accounts shall be recorded:
Dr 111, 112, 138, etc.
Cr 515 – Financial income.
- When receiving investment interests including the investment interests accrued before re-buying that investment, those interests must be allocated. Only the interests of periods in which the enterprise buys that investment shall be recorded to financial income; the interests accrued before the enterprise re-buys that investment shall be recorded as a decrease in value of such investment as follows:
Dr 111, 112, 138, etc (total collected interests)
Cr 121 – Trading securities (interests accrued before the enterprise re-buys the investment)
Cr 515 – Financial income (interests after the enterprise buys the investment).
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