Accounting treatment for transactions in foreign currencies:

• Actual exchange rate that is the rate approximating the average transfer exchange rate of the buying and selling rates of the commercial bank where an enterprise most frequently trades. The approximate exchange rate must ensure its disparity does not exceed +/- 1% compared with the average transfer exchange rate. The average transfer exchange rate is determined daily or weekly or monthly based on the average between the daily buying transfer rate and selling transfer rate of the commercial bank. However, the use of approximate rate must ensure that there is no material effect on the financial position and business performance of the accounting period. With this amendment allowing the use of approximate rate, enterprises have been provided a more flexible option in their daily accounting work instead of applying respective buying and selling rates as specified previously in Circular 200. Revaluation of balances denominated in foreign currencies at the date of financial statements: If enterprises use the approximate exchange rate to account for transactions denominated in foreign currencies in the accounting period, the enterprises must use the transfer rate of the commercial banks where they most frequently trade to revalue balances denominated in foreign currencies at end of the accounting period. The transfer rate can be the buying or selling rate or average transfer rate of the commercial banks.

b) Using actual exchange rate

Circular 53 also mentions about using actual exchange rate for credit entries of cash and accounts receivable and debit entries of accounts payable in foreign currencies. In this case, the recognition of foreign exchange differences in the accounting period is made either at the time of the transactions or periodically depending on the characteristics of the business operations and business management requirements. At end of the accounting period, the revaluation of the balances of these accounts shall be made as follows:

• For those monetary items denominated in foreign currencies which have no balance in their original currencies, enterprises must transfer the entire foreign exchange differences arising in the period to financial income/expense respectively.

• For those monetary items denominated in foreign currencies which still have balance in their original currencies, enterprises must revalue these balances and recognize unrealized foreign exchange differences in compliance with the current guidance stated in Item 4.2, Article 69 of Circular 200. c) Consistent principle in the selection of exchange rate Enterprises must clearly disclose the selection of applicable exchange rate in the Notes to financial statements and ensure it is on a consistent principle.

2. Changes relating to liquidation or transfer of trading securities

Circular 53 also allows to use first in first out method or weighted average method to replace the rolling weighted average method in determining cost of trading securities upon liquidation or sale. Enterprises need to consistently apply the selected method to calculate cost of trading securities during the fiscal year. In case of changing the selected method, enterprises must disclose the change sufficiently in the Notes to financial statements according to the current accounting standards.

Please click PwC Vietnam Newsbrief_Circular 53 Amendment to Circular 200 (EN)  for more information and PwC Vietnam Newsbrief_Circular 53 Amendment to Circular 200 (VN)  for Vietnamese version.

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