How is the goodwill of the equitized enterprises determined in Vietnam?
How is the goodwill of the equitized enterprises determined in Vietnam?
How is the goodwill of the equitized enterprises determined in Vietnam? Hello Lawnet, I am Tran Nguyen Bao Phuoc, I am looking for regulations related to the conversion of state-owned enterprises and single-member limited liability companies with 100% charter capital invested by state-owned enterprises into joint stock companies. I have some questions that I need the your support. What are regulations on determining the goodwill of the equitized enterprises in Vietnam? What document specifies this matter? I look forward to receiving your answer. Thank you!
1. How is the goodwill of the equitized enterprises determined in Vietnam?
According to the provisions of Article 31 of Decree 126/2017/ND-CP as amended by Clause 7, Article 3 of Decree 140/2020/ND-CP on the transformation of state-owned enterprises and single-member limited liability companies wholly invested by state-owned enterprises into joint-stock companies, the determination of the goodwill of the equitized enterprises in Vietnam is regulated as follows:
1. The goodwill of the equitized enterprises includes brand value and development potential.
2. The goodwill of the equitized enterprises is determined as follows:
a) The brand value is determined based on the actual costs of creating and protecting the brand name and trade name during the enterprise's operation for the five years preceding the determination of the enterprise's value, including costs of establishing the enterprise, training employees, advertising, and promotional activities domestically and internationally to promote products and introduce the company; and building the enterprise's website.
b) The development potential value included in the value of the equitized enterprise is the potential development of the enterprise, evaluated based on the enterprise's future profitability by comparing the enterprise's rate of profit to the interest rate on the bonds of the Government of Vietnam as follows:
| Development Potential Value | = | State capital value according to the accounting books at the time of determining the enterprise's value | x | Average post-tax profit rate over state capital in the five years preceding the determination of the enterprise's value | - | The winning interest rate on the Government of Vietnam's 5-year bonds as announced by the Ministry of Finance at the nearest time before the determination of the enterprise's value |
In which:
- The state capital value according to the accounting books at the time of determining the value of the equitized enterprise is the total actual value according to the accounting books at the time of determining the value of the equitized enterprise after deducting liabilities, the balance of funds (if any), and not including the balance of exchange rate differences re-evaluated for monetary items denominated in foreign currency as specified in Clause 3, Article 17 of this Decree.
- State capital is determined to include the balances of: Owner's investment capital - account 411; Development investment fund - account 414; and Basic construction investment capital - account 441 according to Circular No. 200/2014/TT-BTC dated December 22, 2014, of the Ministry of Finance on guiding corporate accounting. The determination of state capital for equitized enterprises that are credit institutions follows the guidelines of the State Bank of Vietnam.
- The post-tax profit rate is determined as follows:
| Average post-tax profit rate over state capital in the five years preceding the determination of the enterprise's value | = | Average post-tax profit in the five consecutive years preceding the determination of the enterprise's value | x | 100% |
| Average state capital according to the accounting books in the five consecutive years preceding the determination of the enterprise's value | ||||
Average state capital according to the accounting books in the five years is determined by the total annual average state capital divided by 05. The annual average state capital is determined based on the state capital at the beginning of the year plus state capital at the end of the year divided by 02.
Best regards!
