Circular 107: Method of accounting for unrecoverable costs in Vietnam

Circular 107: Method of accounting for unrecoverable costs in Vietnam (Internet image)

Clause 4, Article 9 of Circular 107/2014/TT-BTC stipulates the method of accounting for unrecoverable costs in Vietnam as follows:

- When costs incurred at prospecting, exploration and resource volume estimate stages; oil and gas development and extraction stages, are defined as unrecoverable costs, entries shall be posted to the following accounts:

+ Debit A/C 249 – Unrecoverable costs

+ Credit A/C 246, 247, 248.

- When unrecoverable costs conform to statutory requirements laws and oil, and gas agreement, and are re-classified as recoverable costs, entries shall be posted to the following accounts:

+ Debit A/C 246, 247, 248

+ Credit A/C 249 – Unrecoverable costs.

- Accountants shall record any decrease in recoverable costs and amount of paid-in capital of contracting parties upon termination of the oil and gas agreement by posting the following entries:

+ Debit A/C 3411, 4111.

+ Credit A/C 249 – Unrecoverable costs.

- Upon liquidating the amount of raw materials, tools or instruments held in stock which have yet to be dispatched for oil and gas operations:

+ If the proceeds obtained from liquidation thereof are less than the specified book value thereof, accountants must post the following entries to relevant accounts as follows:

++ Debit A/C 111, 112, 131, etc. Amount of proceeds generated from liquidation

++ Debit A/C 249 – Unrecoverable costs (Negative difference between the amount of proceeds generated from liquidation and the specified book value of these raw materials, tools or instruments subject to liquidation)

++ Credit A/C 152, 153 (Book value of raw materials, tools or instruments subject to liquidation)

++ Credit A/C 3331 – Output VAT payable (where applicable)

+ If the proceeds obtained from liquidation thereof are greater than the specified book value thereof, accountants must post the following entries to relevant accounts as follows:

++ Debit A/C 111, 112, 131, etc. Amount of proceeds generated from liquidation

++ Credit A/C 152, 153 (Book value of raw materials, tools or instruments subject to liquidation)

++ Credit A/C 249 – Unrecoverable costs (Positive difference between the amount of proceeds generated from liquidation and the specified book value of these raw materials, tools or instruments subject to liquidation)

++ Credit A/C 3331 – Output VAT payable (where applicable)

More details can be found in Circular 107/2014/TT-BTC, effective from January 1, 2015.

Thuy Tram

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