10/2/2023

FIXED ASSETS:
ACQUISITION AND
DISPOSITION
Chapter 8
Financial Accounting 1

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Objectives Legal regulations

Distinguished between tangible asset and
intangible asset • VAS 03 “Tangible fixed asset”; VAS 04
“Intangible fixed asset”
Determine initial cost of fixed asset
• Circular 200/2014/TT-BTC.
Understand an accounting process for
acquisition and disposition of fixed asset • IAS 16 “Property, Plant and Equipment”;
Discuss the information of PPEs that is presented
IAS 38 “Intangible Assets”.
and disclosed in financial statements.

Distinguished between IFRS and VAS

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CONTENTS

1. General information

2. Determine cost of Fixed asset

3. Account for acquisition

Vietnamese Accounting
Regulations 4. Account for disposition

5. Account for non-cash exchange

6. Present information on FS

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General information General information

Criteria
Definition
Fixed Assets refer to tangible or
intangible assets that : Probable future
economic
Criteria of
assets
benefit
- are held for use in the production or
supply of goods or services, for rental Value is reliable
to others, or for administrative Criteria
Useful time: >
purposes, and 12 months
Non-current asset

- meet the eligibility criteria. Value: >= VND

30 million
According to present
regulation

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General information General information

Classification Internal control
Manner • Any increase or decrease in fixed assets must be
recorded, each asset has its own detail book for
management.
• Fixed assets are monitored in detail by each object and
Physical
Purpose Ownership type. Each asset is tracked on a detailed card (including
substance
contents, characteristics, location of use, ...).
Tangible Intangible For Other Owner • Periodically, company counts for fixed assets. All cases
production purpose (purchase Lease of redundancy, lack of fixed assets must be recorded in
or , build,…)
provision minutes, find reason and resolve.
of services

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DETERMINE VALUE OF FIXED ASSET DETERMINE

Costs toCOST OF FIXED ASSET
be Capitalized
The initial Equipment Land (not depreciable)
cost of a • Net purchase price • Purchase price
fixed asset The end of the • Taxes • Real estate commissions
includes Initial accounting • Transportation costs
use • Attorney’s fees
the • Installation costs
period • Title search
purchase
depreciation • Modification to building
price and necessary to install • Title transfer fees
Initial
all other equipment • Title insurance premiums
costs cost
• Testing and trial runs • Removing old buildings
necessary
to bring it
to Cost Carrying
condition - Accumulated =
amount
and depreciation
location
for use

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DETERMINE
Costs toCOST OF FIXED ASSET
be Capitalized DETERMINE
Costs toCOST OF FIXED ASSET
be Capitalized
Land Improvements Buildings
Intangible Assets
Separately identifiable costs of • Purchase price
• Patents
• Driveways • Attorney’s fees The initial cost of an intangible
• Copyrights
• Parking lots • Commissions asset includes the purchase
• Trademarks price and all other costs
• Fencing • Reconditioning
• Franchises necessary to bring it to
• Landscaping
• Goodwill condition and location for use,
• Private roads such as legal and filing fees.

Intangible Assets Intangible Assets ─ Patents

• An exclusive right recognized by law and granted by a
sovereign state for a limited period
Lack physical Exclusive • Holder has the right to use, manufacture, or sell the
substance. Rights. patented product or process without interference or
infringement by others.
• Some R & D costs that lead to an internally developed
Intangible patent are expensed in the period incurred, while
others are capitalized
Assets

Future benefits less certain

than tangible assets.

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Intangible Assets Intangible Assets

Franchise
Copyrights Trademarks A contractual arrangement where the franchisor
• A form of protection given by grants the franchisee exclusive rights to use
 A symbol, design, or logo
law to authors of literary, the franchisor’s trademark within a certain
associated with a business.
musical, artistic, and similar area for a specified period of time.
works.  If internally developed,
trademarks have no
• Copyright owners have recorded asset cost.
exclusive rights to print, reprint,
copy, sell or distribute, perform  If purchased, a trademark is
and record the work. recorded at cost.
• Generally, the legal life of a  Registered with relevant
copyright is the life of the national authority and
author plus 50-100 years (or a renewable indefinitely in
finite period for anonymous or (usually) 10-year periods.
corporate creations).

ACCOUNTING FOR THE INCREASING

OF FIXED ASSETS Acquisition
• Account:
Account 211,213
Acquisition
Bal:XXX

Self-construction
COST

Exchange Bal:XXX

• Document:
Equity contribution - Invoice
- Receipt
Donation - …..

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Acquisition (use for production or supply of

goods & services) Example:
111,112,331… 211/213 A company purchase a fixed asset for selling
Price before VAT department with purchase price is 100.000.000VND,
133 (excluded VAT 10%,) transportation cost is
VAT 1.100.000VND (included VAT 10%). This asset is
sponsored by Construction investment fund.

Direct expense

411 441, 352…

Transfer equity

Fixed asset Acquisition (use for welfare

purpose) Example:
A company purchase a fixed asset for welfare purpose
111,331,... 211,213 with purchase price is 40.000.000VND, VAT 10%,
(1)purchase transportation cost is 220.000VND (included VAT
(Price after VAT) 10%). This asset is sponsored by welfare fund.

111,112,141,333
(2) Direct expense

3533 3532
(3) Transfer fund

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Acquisition fixed assets Spare parts, servicing equipment,

Acquisition
(not yet ready for use) stand-by equipment and similar items)

111,112,… 2411 211,213 Dr 211: Cost of fixed asset

Dr 153: Fair value of spare parts…
Dr 133: VAT
133 Cr 111,112, 331…:

Installment payment Example

A company purchases an equipment and use it at company’s

111,112 331 211,213 plant with the promptly payment purchase price without VAT:
Payment
180.000.000VND, 5% VAT, installment interest (not subject to
Full payment price VAT) 12.000.000VND, the installment purchase price without VAT:
192,000,000VND. Payment period is 24 months (pay on the last
133 day of each month, starting from this month). Company has a
VAT payment for the first month by cash on hand.

242 635
Allocate
Installment
Interest interest

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Self-constructed asset Example:

During construction process

Received a factory from the builder after
After Construction Completion
completion. Expenditure for this construction
111,152,153… 241(2) 211,213 is [Link] VND. The approved
(1)Expenditure for (2a) Expenditures approved expense is [Link] VND.
construction to recognized as fixed asset
632

(2b)expenditure not approved

411 441
Transfer equity

Self-produced Fixed Assets Fixed assets contributed by investors

•Self-production:
Ex: Issued from stock a finished goods and use it as a fixed 411 211,213
asset at selling department with value 60.000.000VND
Value of Asset
(Fair value)

155 211 111,331

Direct expense

Issue price

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Donated asset

Donated Assets • Donation

 On occasion, companies acquire assets through
donation.
711 211, 213
 The receiving company records
• The donated asset at fair value.
• Revenue equal to the fair value of the donated asset.

111,331
Direct expense

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Self-construction intangible asset:

R&D Costs
R&D Costs
Research phase Development phase
Examples of research activities are: Examples of development activities are:
a) activities aimed at obtaining new knowledge; a) the design, construction and testing of pre-production or
b) the search for, evaluation and final selection of, pre-use prototypes and models;
applications of research findings or other knowledge; b) the design of tools, jigs, moulds and dies involving new
c) the search for alternatives for materials, devices, technology;
products, processes, systems or services; and c) the design, construction and operation of a pilot plant that
d) the formulation, design, evaluation and final selection of is not of a scale economically feasible for commercial
possible alternatives for new or improved materials, production; and
devices, products, processes, systems or services. d) the design, construction and testing of a chosen
alternative for new or improved materials, devices,
products, processes, systems or services.

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R&D Costs R&D Costs

 All expenditure in the research phase are to be expensed Capitalization Criterion
when incurred.
 Expenditure incurred in the development phase, but
before the R&D is successfully completed, are to be
capitalized

Costs Operating
Expensed Costs Costs
as R&D Capitalized and Amortization

Start of Capitalization
Criterion R&D Completed Sale of
R&D
(Enter Development Phase) Successfully Product
Activity
PIRATE

R&D Costs R&D Costs

Can not distinguished between research and
development
DEVELOPMENT PHRASE

111,112,334,338… 242 642

111,112,334,338… 2412 213 Expense Allocate
Meet criterion
Expense expense
642
Do not meet
criterion

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Disposition Disposition

• Document: 211 214 711 152

– Invoice (1)Write off (3a)scrap
Acc depr
– The record of the fixed asset cost
811
111,131…
– Contract for sale and purchase of fixed (3b)Income
Carrying 911
assets amount
111,152…
– Asset valuation minutes
(2)Related expense

133 33311

VAT

Example: Mortgage by fixed asset

Cheney Company sold a 20-ton mechanical 211 244

draw press for 60.000.000 VND, VAT 10%,
receive cash in bank. The old draw press
cost 77.000.000 and had a book value of
55.000.000. Transportation expense is 214
1.050.000 (include VAT 5%), paid by cash on
hand.

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Shortage asset Exchange

211 214 1388
(1)Write off (2a)

1381
811
Similar Dissimilar
(2b)

Do not create income Create income

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Exchange Exchange
• Similar exchange: Dissimilar exchange

211A, 213A 811 711 131 211B,213B

211A 211B (1) (2) (3)
214 33311 133

111,112
214 (4)

(5)

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Example: PRESENTATION
• Exchange equipment A (360 million cost, 60 million • Statement of Financial position
accumulated depreciation) for 30 million VND cash Non-current asset
and a machine B. The fair value of A is 280mil VND,
II. Fixed assets
Fair value of B is 250 million VND. 1. Tangible assets GTCL
- Historical costs
- Accumulated depreciation (*)
2. Financial leasehold assets
- Historical costs
- Accumulated depreciation (*)
3. Intangible assets
- Historical costs
- Accumulated depreciation (*)

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Fixed-Asset Turnover Ratio

This ratio measures how effectively a company
manages its fixed assets to generate revenue. End of Chapter 8
Fixed asset
Net sales
turnover =
Average fixed assets
ratio
GAP Gymboree
2009 2008 2009 2008
Property, plant, and
equipment (net) $ 2,933 $ 3,267 $ 204 $ 186
Net sales 14,526 1,001

$14,526 $1,001
= 4.69 = 5.13
($2,933 + $3,267)/2 ($204 + $186)/2
Gymboree generates $0.44 more in sales dollars
for each dollar invested in fixed assets.

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