Account 341 - Loans and finance lease liabilities

1.Accounting Principles

a) This account shall be used to record loans, finance lease liabilities and payment of the loans, finance lease liabilities of the enterprises. Loans under the forms of issuance of bonds or preference shares with provisions requiring the issuer to repurchase at a certain time in the future shall not be recorded in this account.

b) Enterprises must monitor in detail the payable term of loans, finance lease liabilities. The loans, finance lease liabilities with payment period of more than 12 months from the date of the financial statements, accountants shall present as long-term loans and finance lease liabilities. Loans and finance lease liabilities fall due for settlement within the next 12 months from the date of the financial statements, accountants shall present as short-term loans and finance lease liabilities for the payment plan.

c) Borrowing expenses directly related to the loans (other than payable interest), such as expenses for verification, audit, making application... shall be accounted for in financial expenses. Where these expenses arise from loans for purposes of investment, construction or production of assets in progress, they shall be capitalized.

d) For the financial lease liabilities, total liabilities recorded in the Credit side of Account 341 shall be the total payable amount calculated on the present value of minimum lease payments or the fair value of leased assets.

e) Enterprises must account for in details and monitor each object of the loan or liability, loan agreement and type of loan asset. In case of loans or liabilities in foreign currency, accountants must monitor in detail the currency and comply with the following principles:

- Loans, liabilities in foreign currency must be converted into accounting monetary units in accordance with the actual exchange rate at the arising time;

- When paying loans, liabilities in foreign currency , the Debit side of Account 341 shall be entitled to convert according to exchange rates recorded in accounting books in actually specific identification for each object;

- When establishing financial statement, the balance of the loan, finance lease liabilities in foreign currency must be revalued at actual exchange rates at the date of the financial statements.

- The exchange rate differences arising from the payment and the revaluation at the end of the period of loans, finance lease liabilities in foreign currencies shall be accounted for in revenues or expenses of financial activities.

2.Structure and contents of the account 341 - Loans and finance lease liabilities

Debit side:

- Sums paid for loans, finance lease liabilities;

- Sum of loans, liabilities reduced due to agreement of the lenders, creditors;

- Exchange differences due to revaluation of the balance of loan, finance lease liabilities by foreign currency at the end of period (in case exchange rate of foreign currency falls against the Vietnam dong).

Credit side:

- Sum of loans, finance lease liabilities incurred during the period;

- Exchange differences due to revaluation of the balance of loan, finance lease liabilities by foreign currency at the end of period (in case exchange rate of foreign currency rises against the Vietnam dong).

Credit balance: Balance of remaining loans, finance lease liabilities.

Account 341 - Loans and finance lease liabilities comprise 2 sub-accounts

Account 3411 - Loans: This account records the value of the loans and the payment of the loans of enterprises (this account does not record loans under the form of bond issuance).

Account 3412 - Finance lease liabilities This account records the value of finance lease liabilities and the payment of finance lease liabilities of enterprises.

3.Method of accounting for several major transactions

a)Loans by cash

- Loans by Vietnam dong (put into cash fund or deposited into bank), record:

Dr 111- Cash (1111)

Dr 112- Cash in bank (1121)

Cr 341 - Loans and finance lease liabilities (3411)

- Loans by foreign currency converted into Vietnam dong according to actual transaction exchange rates, record:

Dr 111-Cash (1112) (loan put into cash fund)

Dr 112- Cash in bank (1122) (loan deposited into bank)

Dr 221, 222- (loan invested into subsidiaries, associated companies, joint-ventures)

Dr 331- Supplier payable (loan paid straightly for sellers)

Dr 221-Tangible fixed assets (loan for purchase of fixed assets)

Dr 133- Deductible value-added tax (if any)

Cr 341 - Loans and finance lease liabilities (3411)

- Loan expenses directly related to the loan (other than accrued interest) such as expenses for audit, application for verification... record:

Dr 241, 635

Cr 111, 112, 331

b) Loans transferred straightly to sellers for purchase of inventory, fixed assets, to pay for capital investment, if input VAT is deductible, record:

Dr 152, 153, 156, 211, 213, 241 (purchase price excluding VAT)

Dr 213 - Intangible fixed assets (purchase price excluding VAT)

Dr 133- Deductible value-added tax (1332)

Cr 341 - Loans and finance lease liabilities (3411)

- If the input VAT is not deductible, the value of purchase and construction of fixed assets shall be recorded including VAT. Borrowing expenses directly related to the loans (other than accrued interest) as expenses for audit, application for accounting verification shall be similar to entries in point a.

c) Loans for payment or capital advance (prepaid) to sellers, contractors of construction, to pay the expenses, record:

Dr 331, 641, 642, 811

Cr 341 - Loans and finance lease (3411)

d) Loans for investments in subsidiaries, associated companies and joint ventures, shares, bonds, record:

Dr 221, 222, 228

Cr 341 - Loans and finance lease liabilities (3411)

dd) The accrued interest are added to the principal, record:

Dr 635- Financial expense

Dr 154, 241 (if the interest is capitalized)

Cr 341 - Loans and finance lease liabilities (3411)

e) Payment loans by Vietnam dong or by sums received from debts of the customer, record:

Dr 341 - Loans and finance lease liabilities (3411)

Cr 111, 112, 131

g) Payment of loan in foreign currency:

Dr 341 – Loans and finance lease liabilities (under exchange rates of account 3411)

Dr 635 - Financial expense (loss on forex)

Cr 111, 112 (at the exchange rate in accounting books of Accounts 111, 112)

Cr 515 - Financial income (gain on forex).

h) Accounting of transactions involving financial lease shall comply with the provisions of accounts 212 - Finance lease fixed assets.

When establishing financial statement, the balances of the loan, finance lease liabilities in foreign currency must be revalued at real exchange rates at the end of period:

- If loss on forex is incurred, record:

Dr 413 - Exchange differences

Cr 341 - Loans and finance lease liabilities

- If gain on forex is incurred, record:

Dr 341 - Loans and finance lease liabilities

Cr 413 - Exchange differences

Source: Circular 200