Vietnam: Accounting method for allocation of goodwill under Circular 202

Vietnam: Accounting method for allocation of goodwill under Circular 202 (illustrative image)

Under Article 20 of Circular 202/2014/TT-BTC on the accounting method for allocation of goodwill in Vietnam:

1. Goodwill arising on the purchase date is allocated evenly into the consolidated business results using the straight-line method within a period not exceeding 10 years. In cases where the amount of goodwill impairment in the year exceeds the annual allocation amount using the straight-line method, the allocation is made according to the impairment amount.

2. In the event of allocating goodwill for the first period, the accountant determines the goodwill to be allocated in the period and records:

- Debit: Enterprise management expenses (Goodwill allocated in the period);

- Credit: Goodwill (Goodwill arising in the period)

3. When allocating goodwill from the second period onwards, the accountant must reflect the allocation amount in the current period and the cumulative amount allocated from the purchase date to the start of the reporting period and record as follows:

- Debit: Cumulative unallocated post-tax profit until the end of the previous period (cumulatively allocated goodwill until the end of the previous period);

- Debit: Enterprise management expenses (Goodwill allocated in the reporting period);

- Credit: Goodwill (Cumulatively allocated goodwill until the end of the reporting period).

4. After all goodwill has been allocated, the adjustment entry is as follows:

- Debit: Cumulative unallocated post-tax profit until the end of the previous period;

- Credit: Goodwill.

Details may be found in Circular 202/2014/TT-BTC effective from February 27, 2015.

Ty Na

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