What are principles of accounting for expenses of microfinance institutions in Vietnam?

Pursuant to Article 53 of the Circular 05/2019/TT-BTC (takes effect from 01/04/2019) stipulating principles of accounting for expenses of microfinance institutions in Vietnam as follows:

1. Expenses are defined as amounts that result in decreases in economic benefits and are recorded at the time of a transaction that arises or rather definitely arises in the future, regardless of whether money is spent or not.

2. Recording expenses even if the payment deadline does not expire but it is rather obvious that they will arise must adhere to the prudence and capital preservation principles. Expenses and revenues generated by incurring these expenses shall be recorded concurrently according to the matching principle. However, in certain cases, the matching principle may be conflicting with the prudence principle in the accounting sector, accountants must refer to the nature of and Accounting Standards for reflecting transactions in a reliable and rational manner.

3. Expenses that are not deemed as assessable ones set off against CIT under the provisions of the Law on Taxation, but are proved by invoices and evidencing documents, and have been accounted for according to the accounting regime, shall not be recorded as decreases in expenses in balance sheets but may only be adjusted in the CIT finalization as increases in the CIT amounts payable.

4. This account shall be intended for reflecting expenses of microfinance institutions, including: Expenses for credit operations; expenses for services; CIT expenses; other operating expenses; administrative expenses; provisional expenses; other expenses.

At end of an accounting period, all balances of expenses proved by evidencing documents shall be carried forward to the Account 001 – “Determination of business results” until none of them is left.

5. In case of liquidation and disposal of fixed assets, total value accounted for in this account shall be all of expenses associated with the liquidation, disposal of fixed assets, the value of fixed assets upon liquidation and disposal remaining after these expenses have already been offset by using compensations of individuals, collectives and insurance organizations (if any - in case where related collectives or individuals cause loss or damage to these assets or insured assets). All proceeds from liquidation and disposal of fixed assets shall be recorded in the account reflecting other revenues.

6. Expenses shall be recorded in the following accounts:

- Account 801 – Expenses incurred from credit operations;

- Account 811 – Expenses incurred from service operations;

- Account 831 – CIT expenses;

- Account 841 – Other operating expenses;

- Account 851 – Administrative expenses;

- Account 881 – Provisional expenses;

- Account 891 - Other costs.

Above are principles of accounting for expenses of microfinance institutions in Vietnam.

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