Hanoi Lawyers - Conditions to make appropriation of provision for long-term investment
On June 29, 2013, the Ministry of Finance issued the Circular No. 89/2013/TT-BTC amending and supplementing the Circular No. 228/2009/TT-BTC dated December 7, 2009 of the Ministry of Finance guiding the appropriation and use of provisions for devaluation of inventories, loss of financial investments, bad receivable debts and warranty for products, goods and construction works at enterprises.
At this Circular, Capital portions currently invested by an enterprise in other economic organizations set up under law and other long-term investments for which provisions must be appropriated in case the economic organizations invested by enterprises get loss (except cases of loss anticipated in the business plans compiled before making investment). The appropriation of provision for long-term investment is performed for investments presented under method of original price, not applied to investments presented under method of equity capital in accordance with law.
Besides, regulations on handling of the provision have no changes. In particular. at the time of appropriating provisions, if the capital amounts invested in economic organizations are lost due to loss-making operations of these economic organizations, a provision for loss of financial investments must be appropriated according to Item c of this Article; If the amount of the provision for loss of financial investments to be appropriated is equal to the balance of the existing provision, the enterprise is not required to appropriate the provision; If the amount of the provision to be appropriated is higher than the balance of the existing provision, the enterprise shall add the difference to its financial expenditures. If the amount of the provision to be appropriated is lower than the balance of the existing provision, the enterprise shall refund the difference and record it as a decrease in its financial expenditures.This Circular takes effect on July 26, 2013.
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