Accounting Principles for turnovers

1. Turnovers from the economic benefits gained increase owner‘s equity of enterprises except for the additional contribution of the shareholders. Turnovers is recorded at the time the transaction arises when the economic benefits are firmly gained, determined under the fair value of sum entitled to be received, regardless of having earned money or being going to earn money.
2. Turnovers and cost setting up such turnovers must be recorded simultaneously under the principle of conformity. However, in some cases, conformity principles may conflict with the precautionary principle in accounting, accountants must base on the nature and accounting standards to record transactions honestly and reasonably.

- An economic contract may include multiple transactions. Accountants must identify transactions to apply conditions to record turnovers in accordance with the provisions of accounting Standards of "Turnovers".

- Turnovers must be recorded in accordance with nature rather than the form or the name of the transaction and must be allocated under obligations of providing goods or services.

For example, customers may only receive promotional goods when buying goods of units (buying two products, getting one free), the nature of the transaction is discount, free gift products in the form are known as promotion but in nature are sale because customers will not qualify if they do not buy the product. In this case, the value of free gift products is recorded in cost price and turnovers corresponding to the fair value of such products must be recorded.

Example: In case of selling products and goods with replacement products, goods, equipment (in case of malfunction prevention), turnovers for shall products, goods sold and replacement products, goods, equipment must be allocated. The value of the replacement products, goods, equipment is recorded in cost of goods sold.

- For transactions from which obligations of the seller arising at the current time and in the future, turnovers must be allocated according to the fair value of each obligation and are recorded when the obligations are fulfilled .

3. Turnovers, profit or loss are only considered not to be earned if enterprises must be responsible for obligations in the future (except for normal warranty obligation) and are uncertain of economic benefit; The classification of gains and losses into earned or unearned does not depend on the cash flow is incurred or not.

Gains and losses arising from revaluation of assets and liabilities are not considered not to be earned because at the time of revaluation, units have the right to the property and has obligation with liabilities, for example: Gains and losses arising from revaluation of assets contributed as capital investment in other units, revaluation of financial assets at fair value, exchange differences due to revaluation of monetary items derived from foreign currencies ... are considered to have earned.

4. Turnovers do not include sums collected on third party, for example:

- Indirect taxes (VAT, export duties, excise taxes, environmental protection tax) payable;

- Amount which the turnovers agent collects on goods owners due to turnovers agency ;

- Surcharges and fees collected in addition to the unit price are not entitled;

- Other cases.

In case of indirect taxes payable that are not separated immediately at the time transactions are incurred, to facilitate accountants, turnovers in the accounting books including indirect taxes may be recorded but periodically, accountants must record a decrease for indirect taxes payable. However, when preparing financial statements, accountants are required to identify and remove all of the indirect taxes payable out of standards of recording turnovers payable.

5. Time, basis for recording accounting turnovers and taxable turnovers may vary depending on the specific situation. The taxable turnovers are only used to determine tax payable as prescribed by law; Turnovers recorded in the accounting books for the financial statements must comply with the accounting principles and, depending on cases, are not necessarily equal to the amount stated on the bill of sale.
6. When rotating products, goods and services among dependent cost-accounting units within the enterprises, depending on the operating characteristics, decentralization of each unit, enterprises may decide on recording turnovers in the units if there is an increase in the value of products and goods between the stages that do not depend on any accompanying documents (invoices or internal vouchers). When preparing general financial statements, all turnovers among units within the enterprises must be excluded.
7. Turnovers recorded shall only include turnovers of the reporting period. For accounts that record turnovers without balance, at the end of period, accountants must transfer turnovers to determine income statement.

Source: Circular 200