What are principles of expense recognition and management of cooperative development assistance funds in Vietnam?

What are principles of expense recognition and management of cooperative development assistance funds in Vietnam?

Pursuant to Article 7 of the Circular 52/2022/TT-BTC stipulating principles of expense recognition and management of cooperative development assistance funds in Vietnam as follows:

1. Expenses recorded as operating expenses of the cooperative fund shall comply with the matching principle between revenues and expenses, and must be supported by adequate lawful invoices and receipts as prescribed by law. All expenses of the cooperative fund must be recognized and recorded for the purposes of preparation and presentation of financial statements in accordance with Vietnam’s accounting standards and relevant law provisions.

2. Expense management principle:

a) For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State: The cooperative fund shall formulate its regulations on internal expenses which must contain appropriate spending limits for each period and be conformable with regulations of law, and submit such regulations to the fund’s chairperson for promulgation;

b) For a cooperative fund that operates under the cooperative business model: Chairperson of the Board of Directors shall promulgate its regulations on internal expenses after they have been approved and ratified by the fund’s general meeting of members;

c) With regard to expenses paid inconsistently with regulations, expenses which are not yet recorded, and those exceeding the spending limits specified in the fund’s regulations on internal expenses, the fund shall determine responsibilities of relevant organizations and individuals for requesting competent authorities to decide compensation plans.

3. Determination of the fund’s expenses for the tax calculation purpose shall comply with regulations of law on taxation.

What do operating expenses and financial expenses of cooperative development assistance funds in Vietnam include?

As prescribed in Clause 1 and 2, Article 8 of the Circular 52/2022/TT-BTC, operating expenses and financial expenses of cooperative development assistance funds in Vietnam include:

1. Operating expenses:

a) Loan interests;

b) Costs associated with lending and debt collection activities;

c) Costs associated with offer and acceptance of trusteeship;

d) Contributions to the loan loss provision as prescribed in Article 28 of the Decree No. 45/2021/ND-CP;

dd) Payments for insurance for operational risks and other types of insurance as prescribed;

e) Other operating expenses.

2. Financial expenses:

a) Expenses on exchange rate differences (if any);

b) Other financial expenses.

What do administrative expenses of cooperative development assistance funds in Vietnam include? 

As prescribed in Clause 3, Article 8 of the Circular 52/2022/TT-BTC, administrative expenses of cooperative development assistance funds in Vietnam include include:

3. Administrative expenses:

a) Asset-related costs, including: Depreciation of fixed assets; fixed asset leasing costs; costs for repair, maintenance and operation of assets; costs for purchase of tools and devices; costs of purchase of asset insurance and vehicle inspection as prescribed; costs for liquidation, transfer or selling of assets, excluding residual value of fixed assets (if any);

b) Expenses on managers and employees:

- For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State: Payments of salaries and wages; salary-based contributions, including social insurance, health insurance, unemployment insurance, and occupational accident and disease insurance contributions, and trade union contributions; shift meal costs; costs of workplace uniforms; compulsory payments for female employees, overtime pay, periodic health checks and other payments for employees made according to regulations of law applicable to single-member limited liability companies of which 100% charter capital is held by the State.

- For a cooperative fund that operates under the cooperative business model: Expenses on managers and employees shall comply with regulations of the Law on cooperatives, the fund's charter on organization and operation, and the fund’s regulations on payment of salaries and wages to managers and employees approved by the fund’s general meeting of members;

c) Management and administration expenses: Electricity and water expenses, telephone, internet and postal service charges, costs of printing materials and papers, stationery; costs of business trips and consulting about the fund’s operations, payment and auditing service charges; costs of hiring of domestic and foreign experts/specialists; remunerations paid to part-time employees, expenses on scientific research and technology innovation; costs of professional training activities; expenses on grant of rewards for initiatives in improving and increasing labor productivity, costs of environmental protection and workplace security tasks; medical expenses, fuel expenses, expenses on fire prevention and fighting tasks, costs of vehicles, costs of information dissemination, advertisement, marketing and sales promotions; expenses on organization of conventions and reception activities as prescribed by law;

d) Allowances paid to dual office holders (if any);

dd) Other administrative expenses as prescribed by law.

Pursuant to Clause 4, 5, 6, 7 Article 8 of the Circular 52/2022/TT-BTC stipulating other expenses as follows:

4. Expenses prescribed in Point i Clause 2 Article 42 of the Decree No. 45/2021/ND-CP.

5. Expenses on establishment of provision for devaluation of inventories, provision for bad receivable debts, provision for asset loss and financial investments, and other provisions made according to regulations of law applicable to single-member limited liability companies of which 100% charter capital is held by the State (if the cooperative fund operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State) or regulations of the law applicable to cooperatives (if the cooperative fund operates under the cooperative business model).

6. Other expenses:

a) Costs for transfer, sale and liquidation of assets (if any), including the residual value of fixed assets transferred, sold or liquidated;

b) Compensations for asset losses made after they have been offset by other funding sources as prescribed;

c) Amounts which have been recorded as revenues but actually unearned;

d) Payment of breach of economic contract penalties;

dd) Court fees, judgment enforcement charges and other costs of proceedings as prescribed by law;

e) Expenses on social activities as prescribed by the Law on taxation;

g) Membership fees paid to domestic and foreign trade associations of which the fund is a member as prescribed by law (if any);

h) Expenses on activities of communist party and trade union;

i) Other expenses as prescribed by law.

7. Limits on expenses specified in Clauses 1, 2, 3 and 4 of this Article are prescribed as follows:

a) For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State: The fund shall comply with regulations of law applicable to single-member limited liability companies of which 100% charter capital is held by the State. In case regulations on these expenses are not available or do not provide specific spending limits, depending on its financial capacity, the cooperative fund shall decide and include spending limits in its regulations on internal expenses in an appropriate and efficient manner, and shall take legal responsibility for its decision;

b) For a cooperative fund that operates under the cooperative business model: The fund shall comply with regulations of the Law on cooperatives and its guiding documents. In case regulations on these expenses are not available or do not provide specific spending limits, depending on its financial capacity, the cooperative fund shall decide and include spending limits in its regulations on internal expenses in an appropriate and efficient manner, and shall take legal responsibility for its decision.

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