Accounting improvement for tangible fixed assets and its depreciation at vietnam multimedia corporation

THE NATIONAL ECONOMICS UNIVERSITY CENTER FOR ADVANCED EDUCATIONAL PROGRAMS **************************** BACHELOR’S THESIS IN ACCOUNTING Topic Accounting Improvement for Tangible Fixed Assets and Its D[.]

CENTER FOR ADVANCED EDUCATIONAL PROGRAMS

****************************

BACHELOR’S THESIS IN ACCOUNTING

Topic Accounting Improvement for Tangible Fixed Assets and Its Depreciation at Vietnam Multimedia

Corporation

Student’s name : Mai Dieu Ly

Internship guide : Hoang Le Son, PhD

Hanoi - 2016

The learning time at university gave me a lot of knowledge and skills to serve

my future career However, knowledge is not everything Therefore, I need toaccumulate more and more experience And the accounting internship at VietnamMultimedia Corporation helped me apply theory to practice Internship is theuseful basis for me before entering my official job To fulfill this internshipperiod, besides my own efforts, I also received great support from my university,

my faculty, my supervisor and Vietnam Multimedia Corporation

First of all, I want to thank my university – The National Economics Universityand Center for Advanced Educational Programs for creating an opportunity for me

to participate in this useful internship Therefore, I have accumulated severalexperiences and skills after studying at university

Next, I would like to thank the enthusiastic support of my supervisor TranManh Dung, PhD, CPA He has guided me during my internship as well as helped

me complete my bachelor's thesis

Finally, I would like to send my gratitude to Vietnam Multimedia Corporation,especially Mr Hoang Le Son, PhD – Chief Accountant of the company Thecompany has given a chance for me to experience working culture in the business

as well as apply knowledge to actual accounting job

STATUTORY DECLARATION iv

ABBREVIATION v

LIST OF TABLES vi

LIST OF FIGURES vii

ABSTRACT 1

CHAPTER 1: INTRODUCTION 2

1.1 The Rationale of the Thesis 2

1.2 Research Objectives 3

1.3 Research Methodology 3

1.4 Research Scope 4

CHAPTER 2: THEORETICAL FRAMEWORK OF ACCOUNTING FOR TANGIBLE FIXED ASSETS AND ITS DEPRECIATION 5

2.1 Tangible Fixed Assets and Its Depreciation 5

2.1.1 Definition of Tangible Fixed Assets and Its Depreciation 5

2.1.2 Characteristics of Tangible Fixed Assets 9

2.1.3 Management of Tangible Fixed Assets 15

2.2 Accounting for Tangible Fixed Assets and Its Depreciation 15

2.2.1 Accounting for Tangible Fixed Assets 15

2.2.2 Accounting for Depreciation of Tangible Fixed Assets 23

CHAPTER 3: THE CURRENT SITUATIONS OF ACCOUNTING FOR TANGIBLE FIXED ASSETS AND ITS DEPRECIATION AT VIETNAM MULTIMEDIA CORPORATION 29

3.1 Overview of Vietnam Multimedia Corporation 29

3.1.1 History and Development 29

3.1.2 Business Operation and Organizational Structure 31

3.1.3 Financial Position and Operational Results 32

3.1.4 Accounting Department Structure and Accounting System 35

Multimedia Corporation 41

3.2.1 Characteristics of Tangible Fixed Assets 41

3.2.2 Fluctuation of Tangible Fixed Assets 45

3.2.3 Management of Tangible Fixed Assets 48

3.3 Current Situation of Accounting for Tangible Fixed Assets and Its Depreciation at Vietnam Multimedia Corporation 51

3.3.1 Detailed Accounting for Tangible Fixed Assets 52

3.3.2 General Accounting for Tangible Fixed Assets 75

CHAPTER 4: DISCUSSION AND RECOMMENDATIONS FOR IMPROVING ACCOUNTING FOR TANGIBLE FIXED ASSETS AND ITS DEPRECIATION AT VIETNAM MULTIMEDIA CORPORATION 85

4.1 Remarks on Current Situation of Accounting for Tangible Fixed Assets and Its Depreciation at Vietnam Multimedia Corporation 85

4.1.1 Advantages of Accounting for Tangible Fixed Assets and Its Depreciation85 4.1.2 Disadvantages of Accounting for Tangible Fixed Assets and Its Depreciation 89

4.2 Suggestions for Improving Accounting for Tangible Fixed Assets and Its Depreciation at Vietnam Multimedia Corporation 91

4.2.1 Implementation of Legal Provisions 91

4.2.2 Management and Use of Tangible Fixed Assets 92

4.2.3 Accounting for Tangible Fixed Assets and Its Depreciation 94

CONCLUSION 97

REFERENCES 98 APPENDIXES

I herewith formally declare that I myself have written the submitted Bachelor’sThesis independently I did not use any outside support except for the quotedliterature and other sources mentioned at the end of this paper.

Hanoi, 01/06/2016Signature

Acc. Account

VTC Corporation Vietnam Multimedia Corporation

Table 2.1: Adjustment Coefficient for the Calculation of Adjusted Reducing Balance

Method 25

Table 3.1: Financial Position of VTC Corporation Through Years 33

Table 3.2: Operational Results of VTC Corporation Through Years 34

Table 3.3: List of Some Tangible Fixed Assets of VTC Corporation 42

Table 3.4: Summary Table of Some Tangible Fixed Assets of VTC Corporation in 2015 44

Table 4.1: Classification of Tangible Fixed Assets According to Situation of Use 93

Table 4.2: Summary Table of Fixed Assets 95

Table 4.3: Fixed Asset Detailed Book in Each Department 96

Figure 1.1: Secondary Data Collection 4

Figure 1.2: Primary Data Collection 4

Figure 2.1: Accounting for Increase in Tangible Fixed Assets by Purchase 19

Figure 2.2: Accounting for Decrease in Tangible Fixed Assets by Liquidation, Sale.22 Figure 2.3: Accounting for Depreciation of Fixed Assets 28

Figure 3.1: Organizational Structure of VTC Corporation 32

Figure 3.2: Accounting Department Structure at VTC Corporation 36

Figure 3.3: Recording Process of Computerized Accounting Form 40

Figure 3.4: Procurement Process of Tangible Fixed Assets at Vietnam Multimedia Corporation 50

Figure 3.5: Quotation of Sieu Thanh Corporation 54

Figure 3.6: Proposal for Purchase Photocopier 55

Figure 3.7: Sales Contract for Purchase Office Equipment 56

Figure 3.8: VAT Invoice 59

Figure 3.9: Minutes of Hand-over and Inspection 60

Figure 3.10: Proposal of Liquidating Fixed Assets 62

Figure 3.11: Decision of Fixed Assets Liquidation 63

Figure 3.12: Minutes of Fixed Assets Liquidation 64

Figure 3.13: Invoice 65

Figure 3.14: Minutes of Liquidated Fixed Assets Hand-over 66

Figure 3.15: Fixed Asset Card (Photocopier Ricoh MP3053) 67

Figure 3.16: Fixed Asset Book (Photocopier Ricoh MP3053) 68

Figure 3.17: Fixed Asset Detailed Book (Photocopier Ricoh MP3053) 69

Figure 3.18: Summary Table of Fixed Assets (Photocopier Ricoh MP3053) 70

Figure 3.19: Fixed Asset Card (Broadcasting Column) 71

Figure 3.20: Fixed Asset Book (Broadcasting Column) 72

Figure 3.21: Fixed Asset Detailed Book (Broadcasting Column) 73

Figure 3.22: Summary Table of Fixed Asset (Broadcasting Column) 74

Figure 3.23: General Journal 76

Figure 3.24: Ledger (Account 211) 77

Figure 3.25: Depreciation Allocation Table 80

Figure 3.26: Depreciation Detailed Book 81

Figure 3.27: Ledger (Account 214) 83

Figure 4.1: Asset Management on BRAVO 7 Software 87

Internship is a period that helps students have an opportunity to approachdirectly to businesses In addition to learning the knowledge in the university,students need to apply that knowledge in fact Therefore, internship helps studentsreinforce their knowledge learned in the university and practice their skills toprepare for their job in the future Internship is very important for every majors,especially for accounting In order to complete my internship, I choose a business

in the field of service – Vietnam Multimedia Corporation After learning andpracticing at the company, I had accumulated many basic and actual skills aboutcorporate culture as well as accounting profession in business environment

This bachelor's thesis was also the result I achieved after internship period atthe company I have chosen the topic "Accounting Improvement for TangibleFixed Assets and Its Depreciation at Vietnam Multimedia Corporation" for myresearch The thesis includes four main and important contents that are presented

Each chapter will provide in details about specific contents such as the rationale

of the thesis, theoretical framework of accounting for tangible fixed assets, thecurrent situations at the company about accounting for tangible fixed assets.Finally, it is my analysis and personal recommendations about improvingaccounting for tangible fixed assets at Vietnam Multimedia Corporation

CHAPTER 1: INTRODUCTION

1.1 The Rationale of the Thesis

Fixed assets play a key part in a company for running businesses They areconsidered as essential facilities in production and business activities Therefore,fixed assets contribute to the increase of labor productivity and the development ofthe economy For instance, from the micro perspective, machinery andmanufacturing process are factors which determine the scale and productioncapacity of enterprises From macro perspective, they are the basis to evaluate therobustness of infrastructure and facilities of the whole economy Theimprovement, innovation and effective use of fixed assets are decisive factors inthe survival and development of enterprises and the economy

Fixed assets as well as the accounting for fixed assets are major concerns ofbusinesses and managers Fixed assets have a big value and a long turnaroundtimes As a result, we need a good organization of the accounting for fixed assets

to track the fluctuation of fixed assets, improve efficient use, and maximizeprofitability as well as firm value Fixed assets must go through many businesscycles to fully complete a rotation of the initial capital Thus, the accounting forfixed assets is an essential task It is a part in business strategy of the enterprisewhich helps managers to manage the initial capital And then, they can findreasonable operating measures and set the correct direction to improve theefficiency of production and business processes as well as affirm the company'sposition on the market

Nowadays, along with the development of science and technology, fixed assetsare equipped more and more modern into the businesses Since then, we need tomanage strictly them in terms of value and artifacts In terms of artifacts, we have

to monitor the preservation and use of fixed assets to control the quantity andcurrent status In terms of value, we have to track the costs, depreciation, andresidual value of fixed assets

Derived from the reasons mentioned above, and along with the guidance of mysupervisor Tran Manh Dung, PhD, CPA during my internship, I have chosen thetheme "Accounting Improvement for Tangible Fixed Assets and Its Depreciation

at Vietnam Multimedia Corporation" Tangible fixed assets contribute toimproving labor productivity In the market economy, tangible fixed asset is animportant factor to create competitiveness for businesses Therefore, in myresearch, I focus only on tangible fixed assets and the accounting for tangiblefixed assets with the case study of Vietnam Multimedia Corporation

1.2 Research Objectives

The overall objective of my research is to look into and assess the accountingfor tangible fixed assets and its depreciation at Vietnam Multimedia Corporation.Thereby, the research will show strengths, weaknesses as well as their causes andpropose recommendations for improving the accounting for tangible fixed assets

at the corporation

Specific objectives of the research are:

 To clarify basic contents of tangible fixed assets and its depreciation in abusiness

 To analyze and evaluate the accounting for tangible fixed assets withtypical case study of Vietnam Multimedia Corporation

 To propose feasible solutions in order to improve the accounting fortangible fixed assets and its depreciation at Vietnam MultimediaCorporation

1.3 Research Methodology

To complete my research, I have made the data collection and data processing.Firstly, I collect two types of data, including secondary data and primary data Thecollection methods of these data are described as follows:

 Secondary data is collected first because these data are availabledocuments I collect secondary data from two sources such as internalsources and external sources Internal sources include severaldocumentation of the company In my research, I choose secondary datafrom financial statements, accounting books and other related documents

On the other hand, external resources are legal documents, data frominternet, and others

 Primary data is collected after that I conduct two methods to collectessential information They are interview and observation For example,during my internship at Vietnam Multimedia Corporation, I interview ChiefAccountant of the company I also conduct other interviews via email ortelephone Moreover, I always observe the working process of accountants

in the company such as the way they collect data as well as the way theyreport to the manager

Figure 1.1: Secondary Data Collection

Figure 1.2: Primary Data Collection

After the data collection process, I perform the data processing The handling ofdata includes analysis, comparison and synthesis to describe and assess theaccounting for tangible fixed assets at the company

1.4 Research Scope

This research was conducted at Vietnam Multimedia Corporation The datawere collected and processed from the accounting documents of 2015 Thisresearch focused on the accounting for tangible fixed assets and its depreciation atVietnam Multimedia Corporation

Secondary Data Collection

From Internal Sources

- Financial Statements

- Corporate Governance Reports

- Accounting Books

- Accounting Documents

- Other Related Documents

From External Sources

- Legal Documents

- Newspapers

- Internet

- Others

Primary Data Collection

CHAPTER 2: THEORETICAL FRAMEWORK OF ACCOUNTING FOR TANGIBLE FIXED ASSETS AND ITS DEPRECIATION

2.1 Tangible Fixed Assets and Its Depreciation

2.1.1 Definition of Tangible Fixed Assets and Its Depreciation

2.1.1.1 Tangible Fixed Assets

Tangible fixed asset is an extremely important part in the business activities ofenterprises Before we learn about the characteristics and the accounting fortangible fixed assets, we need to understand the definition of tangible fixed assets.According to Vietnamese Accounting Standard – VAS No 03 about tangible fixed

assets, the definition is:

“Tangible fixed assets means assets in physical forms which are possessed by theenterprises for use in production and business activities in conformity with therecognition criteria of tangible fixed assets

To be recognized as tangible fixed assets, assets must meet simultaneously all thefollowing four (4) recognition criteria:

i) Future economic benefits will surely be obtained;

ii) Their historical cost has been determined in a reliable way;

iii) Their useful life is estimated at more than one year;

iv) They meet all value criteria according to current regulations

Tangible fixed assets often constitute a key component in the total assets andplay an important role in the reflection of the financial situation of enterprises.Therefore, the determination of an asset whether or not to be recognized astangible fixed asset or a production or business expense in the period shall greatlyaffect the reporting of the enterprises' operation and business results

When determining the first criterion (Section i) of each tangible fixed asset, theenterprises must determine the degree of certainty of the acquisition of futureeconomic benefits, on the basis of evidences available at the time of initialrecognition, and must bear all related risks

Though being unable to directly yield economic benefits like other tangiblefixed assets, those assets used for the purposes of ensuring production and

business safety or protecting the environment are necessary for enterprises toachieve more economic benefits from other assets

The second criterion (Section ii) for recognizing tangible fixed assets is oftensatisfied since the historical cost of the fixed assets has been already determinedthrough procurement, exchange, or self-construction

When determining components of tangible fixed assets, the enterprises mustapply the criteria of tangible fixed asset on a case-by-case basis The enterprisesmay consolidate secondary, separate parts, such as molds, tools, swages, and applythe criteria of tangible fixed asset to such aggregate value Accessories andauxiliary equipment are often seen as movables and thereby accounted into usecosts Major accessories and maintenance equipment shall be determined astangible fixed assets when the enterprises estimate that their useful life would lastfor over one year If they are only used in association with tangible fixed assetsirregularly, they shall be accounted as separate tangible fixed assets anddepreciated over a period shorter than the useful life of related tangible fixedassets.”

Vietnam Valuation Standard No 12 emphasized that: “Tangible fixed assets areassets that have physical forms held by enterprises for the use of production andtrading in line with criteria for recognition of tangible fixed assets of the Ministry

of Finance regulations That kind of assets engage several times in the productionprocess, transfer a part of the value in the product and retain its physical forms.”Under Circular No 45/2013/TT-BTC dated April, 25th, 2013 of the Ministry ofFinance (MoF): “Tangible fixed assets are means of labor primarily in the physicalforms and satisfy the criteria of tangible fixed assets, involved in many businesscycle but remain original physical forms as buildings, structures, machinery,equipment, means of transportation and others.”

“Means of labor are the tangible assets with independent structure, or a system ofmany individual parts of assets linked to perform one or a certain number offunctions and without any part, the system can not work, and if meet the followingthree criteria they shall be regarded as fixed assets:

a) It is certain to gain economic benefit in the future from the use of such asset;b) Having the utilization time of over 01 year;

c) Primary price of assets must be determined reliably, and is valued at 30,000,000(thirty million) VND or more.

In case a system includes many individual components of assets linked together,

in which each component has different utilization time and without anycomponent the entire system still perform its main operating function its mainactivity but due to requirements on management and use of fixed asset requiringseparately managed asset division, each asset division if simultaneously satisfyingthree criteria of fixed assets shall be regarded as independent tangible fixed assets.For animals working and/or giving products, then each of the animalssimultaneously satisfying three criteria of fixed assets is regarded as tangiblefixed

For perennial orchards, each piece of garden, or trees simultaneously satisfyingthree criteria shall be regarded as a fixed tangible asset.”

According to International Accounting Standards (IAS) No 16 - Property, Plantand Equipment: “Items of property, plant, and equipment should be recognised asassets when it is probable that:

- It is probable that the future economic benefits associated with the asset willflow to the entity, and

- the cost of the asset can be measured reliably.”

Another definition of tangible fixed assets comes from the Organisation forEconomic Co-operation and Development: “Tangible fixed assets are non-financial produced assets that consist of dwellings, other buildings and structures,machinery and equipment and cultivated assets.”

Through all definitions above, we understand about tangible fixed assets as well

as the conditions for an asset to be regarded as the tangible fixed asset Next, wemove to the following content which is related to depreciation of tangible fixedassets

2.1.1.2 Depreciation of Tangible Fixed Assets

When tangible fixed assets engage in the production process, its value will bedeclined due to the impact of external factors Then, this reduced value will betransferred to expense in the form of depreciation Similar to tangible fixed assets,its depreciation is defined in many different ways

From the accounting tools site (the complete source of information for theaccountant), depreciation is defined as follows: “Depreciation is the systematicreduction in the recorded cost of a fixed asset Examples of fixed assets that can bedepreciated are buildings, furniture, leasehold improvements, and officeequipment The only exception is land, which is not depreciated (since land is notdepleted over time, with the exception of natural resources) The reason for usingdepreciation is to match a portion of the cost of a fixed asset to the revenue that itgenerates; this is mandated under the matching principle, where you recordrevenues with their associated expenses in the same reporting period in order togive a complete picture of the results of a revenue-generating transaction The neteffect of depreciation is a gradual decline in the reported carrying amount of fixedassets on the balance sheet Depreciation has nothing to do with the market value

of a fixed asset, which may vary considerably from the net cost of the asset at anygiven time Depreciation is a major issue in the calculation of a company's cashflows, because it is included in the calculation of net income, but does not involveany cash flow Thus, a cash flow analysis calls for the inclusion of net income,with an add-back for any depreciation recognized as expense during the period.” According to Vietnamese Accounting Standard – VAS No 03 about tangiblefixed assets: “Depreciation means the systematic allocation of the depreciablevalue of tangible fixed assets throughout the useful life of such assets

The depreciable value of tangible fixed assets shall be allocated systematicallyduring their useful life The depreciation method must be suited to the economicbenefits yielded by the assets to the enterprises The depreciated amount of eachperiod shall be accounted into the production and business expenses in the period,unless they are included in the value of other assets, such as depreciation oftangible fixed assets used for activities in the development stage is a costcomponent of the historical cost of intangible fixed assets (according to theregulations of the standard intangible fixed assets), or the depreciation cost oftangible fixed assets used in the process of self-constructing or self-making otherassets

Economic benefits yielded by tangible fixed assets shall be gradually exploited

by the enterprises through the use of these assets Nevertheless, other factors, liketechnical backwardness, wear-and-tear of these fixed assets due to their non-use,often cause reductions in the economic benefits which the enterprises expect theseassets would bring about Therefore, when determining the useful life of tangiblefixed assets, the following factors must be taken into account:

a) The extent of use of such asset, estimated by the enterprise The extent of use

is assessed according to the estimated capacity or output;

b) The extent of wear-and-tear, depending on the related elements in the asset'suse process, such as the number of working shifts, the enterprise's repair andmaintenance of the asset as well as its upkeep when not in operation;

c) Invisible wear-and-tear arising from the replacement or renovation of thetechnological chain or changes in the market demand for the products or serviceturned out by the asset;

d) Legal constraints in the asset use, such as the date of expiry of the contract offinancial-leasing fixed assets

The useful life of tangible fixed assets shall be determined by the enterprisesmainly on the expected use extent of the assets However, due to the assetmanagement policy of the enterprises, the estimated useful life of fixed assets may

be shorter than their actual useful life Therefore, the estimation of the useful life

of a tangible fixed asset must be also based on the enterprise's experiences onassets of the same type.”

“Depreciation of fixed assets is the calculation and allocation of primary price

of fixed assets in production and business costs systematically during the timedepreciation of fixed assets”, quoted from Circular No 45/2013/TT-BTC datedApril, 25th, 2013 of the Ministry of Finance

That are some definitions of depreciation, followed contents will mention moreand more about the depreciation methods of tangible fixed assets in accounting

2.1.2 Characteristics of Tangible Fixed Assets

2.1.2.1 Characteristics

When tangible fixed assets engage in the production process, its value will bedeclined due to the impact of external factors Then, this reduced value will betransferred to expense in the form of depreciation Tangible fixed assets areinvolved in many business cycles When it engages in the production process,generally the morphology of artifacts of tangible fixed asset is not changed, but itsfeatures and capacity are declined It means that the value of tangible fixed assets

is decreased

Tangible fixed assets are also regared as the commodity Through trade andexchange, it can transfer the ownership and right to use among entities on the

production materials market Tangible fixed assets have the complex structurewhich consist several components with the uneven depreciation level Therefore,

in using process, tangible fixed assets can be damaged in each component

a) Houses and architectural objects;

b) Machinery and equipment;

c) Means of transport, conveyance equipment;

d) Managerial equipment and instruments;

e) Perennial tree garden, animals reared to labor for humans and to yield products.f) Other tangible fixed assets.”

According to Circular No 45/2013/TT-BTC dated April, 25th, 2013 of theMinistry of Finance: “For tangible fixed assets, the enterprises can classify them

as follows:

Type 1: Housing and structures: are the enterprise’s fixed assets formed afterthe construction process, such as head office, warehousing, fences, water tower,open storage, the works decorating housing, roads, bridges, railways, airfield,piers, wharves, docks and slipway

Type 2: Machinery and equipment: the whole machinery and equipment used inthe business operation of the enterprise such as specialized machinery, workingequipment, drilling rigs in the oil and gas area, cranes, technological lines andindividual machines

Type 3: Means of transport, transmission equipment are types of means oftransportation including railway, water way, road, air, pipeline and transmissionequipment, such as information system, electrical system, water pipe andconveyor

Type 4: Equipment and management tools: are the equipment and tools used inthe management of the enterprise’s business operations such as computers for

management, electronic equipment, equipment, measurement and quality tools,dehumidifiers, vacuum cleaners, anti-termite.

Type 5: Perennial orchards, working animals and/or giving products: are theperennial orchards as coffee plantations, tea plantations, rubber plantations,orchards, lawn, green carpet,…, working animals and/or giving products, such asherd of elephants, horses, buffaloes, cows

Type 6: Other types of fixed assets: are all other fixed assets not listed in theabove five types such as pictures.”

Tangible fixed assets can be classified by other ways as follows:

- According to the ownership, there are two types such as: owned tangible fixedassets (we have the right to use and decide) and outsourced tangible fixed assets(we have the right to use but do not have the right to decide)

- According to the aim of using, there are five types such as: tangible fixed assetsawaiting resolution, tangible fixed assets used for production - business,tangible fixed assets used for basic construction, tangible fixed assets used forwelfare, and tangible fixed assets used for non-business activities

- According toforming sources, there are four types such as: tangible fixed assetsunder budget capital, tangible fixed assets under additional capital, tangiblefixed assets under loans, debt, and tangible fixed assets under venture capital

2.1.2.3 Cost of Tangible Fixed Assets

This part will show the determination of historical cost (or primary price) oftangible fixed assets under VAS No 03, Circular No 45/2013/TT-BTC, Circular

No 200/2014/TT-BTC and IAS No 16 Vietnamese Accounting Standard – VAS

No 03 about tangible fixed assets indicated the determination of historical cost fortangible fixed assets as follows:

“Procured tangible fixed assets

The historical cost of a procured tangible fixed asset consists of the buyingprice (minus (-) trade discounts and price reductions), taxes (excluding reimbursedtax amounts) and expenses directly related to the putting of the assets into theready-for-use state, such as ground preparation expense; initial transportation,loading and unloading expense; installation and trial operation expense (minus (-)amounts recovered from products and wastes turned out from trial operation);expert cost and other directly-related expenses

Self-constructed or self-made tangible fixed assets

The historical cost of a self-constructed or self-made tangible fixed asset is itsactual cost plus (+) the installation and trial operation cost Where the enterprisesturn the products made by themselves into fixed assets, the historical costs shall bethe production costs of such products plus (+) the expenses directly related to theputting of the fixed assets into the ready-for-use state In these cases, all internalprofits must not be included in the historical cost of these assets Unreasonableexpenses, such as wasted materials and supplies, labor or other costs in excess ofthe normal levels arising in the self-construction or self-generating process mustnot be included in the historical cost of tangible fixed assets

Tangible fixed assets purchased in the exchange form

The historical cost of a tangible fixed asset purchased in the form of exchangefor a dissimilar tangible fixed asset or other assets shall be determined according

to the reasonable value of the received tangible fixed assets, or that of theexchanged ones, after adjusting the cash amounts or cash equivalents which areadditionally paid or received

Tangible fixed assets augmented from other sources

The historical cost of a tangible fixed asset which is donated or presented shall

be initially recognized according to the initial reasonable value Where it is notrecognized according to the initial reasonable value, the enterprises may recognize

it according to the nominal value plus (+) the expenses directly related to theputting of the assets into the ready-for-use state.”

Circular No 45/2013/TT-BTC dated April, 25th, 2013 of the Ministry ofFinance presented more detail about the determination of primary price of tangiblefixed assets:

“a) Tangible fixed assets from purchase:

The orginal cost of tangible fixed assets from purchase (new or old purchase):the purchase price actually paid plus (+) taxes (excluding refundable taxes) anddirectly related costs to be paid by the time putting the fixed assets into a state ofready for use such as interest incurred during the procurement of fixed assets;transportation costs, loading and unloading; costs of upgrade, installation, testing,registration fee and other directly related expenses

b) Tangible fixed assets purchased in the form of exchange:

The primary price of fixed assets purchased in the form of exchange with anunsimilar tangible fixed asset or other assets is the rational value of tangible fixedasset reveived or rational value of fixed assets brought to be exchanged (afteraddition of additional payables or deduction of the receivables) plus (+) taxes(excluding refundable taxes), the directly related costs to be paid by the timeputting the fixed assets into a state of ready for use such as the cost of shipping,loading and unloading, upgrade, installation, testing and registration fee (if any)

c) Tangible fixed assets to be produced by themselves :

The primary price of tangible fixed assets to be produced by themselves is theactual cost of tangible fixed assets plus (+) costs of installation, testing and otherdirectly related costs by the time putting the tangible fixed assets into a state ofready for use (except for internal profits, value of products recovered during pilottesting, production, the unreasonable costs as waste materials, labor or other costsbeyond the norm prescribed in construction or production)

d) The primary price of tangible fixed assets due to construction:

The primary price of fixed assets due to capital construction is formed by themethod of contractor appointment is the settlement price of the construction asprescribed in the current Regulations on management of investment andconstruction plus (+) registration fee and other directly related costs In case thefixed assets due to construction are put into use but have not been finalized, theenterprises shall record the primary price by the provisional price and adjust aftersettlement of completed works

e) Tangible fixed assets are funded, offered, donated or excessive by detection:

The primary price of tangible fixed assets due to funding, offer, donation,excess due to detection is the value by actual evaluation of the delivery Council orprofessional valuation organization

g) Tangible fixed assets allocated and transferred:

The primary price of tangible fixed assets allocated or transferred include theresidual value of the fixed assets on accounting books at allocating or transferringunits or the value by actual evaluation of the professional valuation organization

as prescribed by law, plus (+) directly related costs which the asset receiving party

has to pay by the time the fixed assets are put into a state of ready for use such ascost of leasing of valuation organization, upgrade, installation, testing

h) Tangible fixed assets from receiving and receiving back contributed capital:

The fixed assets from receiving and receiving back contributed capital are valueagreed on consensus by the members, founding shareholders or agreed betweenenterprises and capital contributors or evaluated by professional organization asprescribed by law and approved by members and founding shareholders.”

Under Circular No 200/2014/TT-BTC dated December, 22nd, 2014 of the

Ministry of Finance: “…Historical costs of purchased tangible fixed assets

include: purchase prices (deducted from trade discounts or rebates), taxes(excluding refundable taxes) and any directly-attributable expenses of putting suchassets into ready-for-use state, such as site preparation, initial delivery andmaterial handling, installation or testing costs (deducted (-) from any recoverablevalues on products or scraps from testing), professional fees and any otherdirectly-attributable expenses The interest cost from loans for purchase ofcompleted fixed assets (fixed assets available for immediate use withoutconstruction investment) shall not be capitalized on historical costs of fixed assets

The historical cost of a tangible fixed asset contributed as capital or return of capital is the value assessed by founding members or shareholders or agreed by

the enterprise and contributors or assessed by a professional appraisal organization

as prescribed and approved by the founding members or shareholders

The historical cost of a tangible fixed asset which is donated or presented

shall equal: actual value assessed by the Board of exchange or a professionalappraisal organization plus (+) directly-attributable expenses (transport, materialhandling, installation, testing or property transfer taxes (if any), etc paid by theasset receiver up to time in which the fixed asset is put into ready-for-use state.”According to International Accounting Standards (IAS) No 16 - Property, Plantand Equipment: “An item of property, plant and equipment should initially berecorded at cost Cost includes all costs necessary to bring the asset to workingcondition for its intended use This would include not only its original purchaseprice but also costs of site preparation, delivery and handling, installation, relatedprofessional fees for architects and engineers, and the estimated cost ofdismantling and removing the asset and restoring the site.”

2.1.2.4 Fluctuation Cases

During the use of tangible fixed assets, it may appear several circumstances offluctuation as follows:

- Increase of tangible fixed assets due to purchase or investment;

- Reduction of tangible fixed assets from the liquidation or sale;

- Repair, upgrade, and others

2.1.3 Management of Tangible Fixed Assets

Article 5 of Circular No 45/2013/TT-BTC dated April, 25th, 2013 of theMinistry of Finance presented about the principle to manage fixed assets: “Allfixed assets in enterprise must have a separate record (including record of delivery

of fixed assets, contracts, invoices of purchase of fixed assets, and other relatedpapers) Each fixed asset must be classified, numbered with its own card,monitored in detail and reflected in the monitoring book of fixed assets

Each fixed asset must be managed by its cost, accumulated depreciation and netbook value:

Net book value = Cost of fixed

assets

-Accumulated depreciation of fixed

assets

For fixed assets without need of use awaiting disposal, but not fullydepreciated, the enterprises have to manage, monitor and preserve under currentregulations and depreciation under the provisions of this Circular

The enterprises must manage for fixed assets fully depreciated but still involved

in business activities as normal fixed assets.”

2.2 Accounting for Tangible Fixed Assets and Its Depreciation

2.2.1 Accounting for Tangible Fixed Assets

2.2.1.1 Accounting Documentation and Accounting Book

Main accounting documentation and accounting books for tangible fixed assetsincluding:

- Purchase request;

- Proposal;

- Sales contract;

- VAT invoice;

- General journal;

- Ledger;

- Minutes of hand-over of tangible fixed assets;

- Minutes of inspection of tangible fixed assets;

- Tangible fixed asset book;

- Minutes of hand-over and inspection;

- Minutes of tangible fixed assets liquidation

2.2.1.2 Accounts Applied

According to Circular No 200/2014/TT-BTC dated December, 22nd, 2014 ofthe Ministry of Finance, account 211 – Tangible fixed assets is applied TheCircular No 200 also indicated that:

“a) This account is used to record current cost and decrease and increase in totaltangible fixed assets of an enterprise according to their historical costs

b) Tangible fixed assets mean assets in physical forms which are possessed by anenterprise for operation in conformity with the recognition criteria of tangiblefixed assets

c) Tangible fixed assets having independent structure, or separate parts associated

in a system for performance of one or several functions, the system shall not beoperated in case of lack of any part An asset meeting all four recognition criteriabelow shall be treated as a fixed asset:

- Future economic benefits will surely be obtained;

- Their historical cost has been determined reliably;

- Their useful life is at least 1 year;

- It meets all value criteria as prescribed in regulations in force

In a system associated by separate parts, in which every part has differentuseful life and the system still operate normally regardless of lack of any part, ifevery part is managed and used separately and meets all four recognition criteria,they shall be treated as independent tangible fixed assets

With regard to working animals or producing animals for production ofcommodities, if each animal species meets all four recognition criteria for fixedassets, they shall be treated as tangible fixed assets

With regard to perennial gardens, if every garden or plant meets all fourrecognition criteria for fixed assets, they shall be treated as tangible fixed assets.d) The costs of tangible fixed assets shall be recorded to account 211 according totheir historical costs The historical costs of each fixed asset must be keep recordsspecifically.”

About the contents and structure of account 211 – Tangible fixed assets, theCircular No 200 presented as follows:

“Debit (Dr.):

- An increase in historical cost of the tangible fixed asset due to completedconstructions, purchase, receipt of capital contribution, grant, donation, present, orsurplus;

- An increase in historical cost of the fixed assets after adjustment due toadditional construction or equipment, or upgrade;

- An increase in historical cost of the fixed assets due to re-evaluation

- A decrease in historical cost of the fixed asset due to re-evaluation

Debit balance: Current historical costs of the fixed assets of the enterprise.

Account (Acc.) 211 – Tangible fixed assets comprises 6 sub-accounts:

- Acc 2111 – Buildings and structures

- Acc 2112 – Machinery and equipment

- Acc 2113 – Means of transportation and transmitters

- Acc 2114 – Office equipment and furniture

- Acc 2115 – Perennial plants, working and producing animals

- Acc 2118 – Other fixed assets.”

2.2.1.3 Accounting for the Increase of Tangible Fixed Assets

According to Circular No 200/2014/TT-BTC dated December, 22nd, 2014 ofthe Ministry of Finance:

“Purchased fixed assets: When purchasing a tangible fixed asset whose input

VAT is deductible, according to documents on purchase of such fixed asset, thehistorical cost of the fixed asset shall be determined, accounting records andreceipt slip of fixed asset shall be prepared and the following accounts shall berecorded:

Dr 211 – Tangible fixed assets (VAT-exclusive prices)

Dr 133 – Deductible VAT (1332)

Cr 111, 112, etc

Cr 331 – Trade payables

Cr 341 – Borrowings and finance lease liabilities (3411)

When the enterprise receives donated or presented tangible fixed assets for put

in use, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets

Dr 211 – Tangible fixed assets (historical cost – buildings, structures in details)

Dr 213 – Intangible fixed assets (historical cost – land use rights)

Dr 133 – Deductible VAT (if any)

Cr 111, 112, 331, etc.”

Figure 2.3: Accounting for Increase in Tangible Fixed Assets by Purchase

2.2.1.4 Accounting for the Decrease of Tangible Fixed Assets

Circular No 200/2014/TT-BTC dated December, 22nd, 2014 of the Ministry ofFinance presented the accounting for the decrease of tangible fixed assets asfollows:

“When selling fixed assets used for business, the following accounts shall be

Dr 811 - Other expenses (residual value)

Cr 211 - Tangible fixed assets (historical cost)

- Costs related to sale of fixed assets shall be recorded to Dr 811 “Otherexpenses”

In case of selling fixed assets used for non-business activities:

- A decrease in sold fixed asset shall be recorded according to receipt slip of fixedasset as follows:

Dr 466 - Funds used for fixed asset acquisitions (residual value)

Dr 214 - Depreciation of fixed assets (depreciated value)

Cr 211 - Tangible fixed assets (historical cost)

- Revenues and expenses related to sale of the fixed asset shall be recorded torelevant accounts as prescribed in regulations of competent agency

Shortage or surplus of tangible fixed assets: The reason for any shortage orsurplus of fixed assets must be uncovered The shortage or surplus must beaccurately and promptly recorded according to “Report on physical inventorycount of fixed assets” and Conclusion issued by the Inventory board according to

specific reasons: a) Surplus of fixed assets:

- If the surplus of fixed assets is detected due to unrecording, an increase in fixedassets shall be recorded according to dossier on fixed assets as follows:

Dr 211 – Tangible fixed assets

Cr 241, 331, 338, 411, etc

- If the fixed assets in surplus are being used, apart from recording the increase intangible fixed assets, the depreciation value used for calculation and deduction ofadditional depreciation of fixed asset used for welfare, non-business or projectpurpose, the following accounts shall be recorded:

Dr operating costs (fixed assets used for business)

Dr 3533 – Welfare funds used for fixed asset acquisitions (used for welfare)

Dr 466 – Non-business funds used for fixed asset acquisitions

Cr 214 – Depreciation of fixed assets (2141)

b) Shortage of fixed assets: it is required to uncover reasons, offenders and handled as prescribed in financial regime in force.

+ The shortage of fixed assets used for business shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 111, 112, 334, 138 (1388) (if the offender is required to make compensation)

Dr 411 – Owner‘s invested equity (if the decrease in equity is permitted to berecorded)

Dr 811 – Other expenses (if the enterprise suffers losses)

Cr 211 – Tangible fixed assets

+ The shortage of fixed assets used for non-business activities shall be recorded asfollows:

A decrease in the fixed asset shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost)

The residual value of the shortage of fixed assets must be recovered according tothe decision on handling of shortage and the following accounts shall be recorded:

Dr 111, 112 (if collecting money)

Dr 334 – Payables to employees (deducted from salaries of employees)

Cr relevant accounts (according to report on handling)

+ The shortage of fixed assets used for culture or activities welfare shall berecorded as follows:

A decrease in the fixed asset shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost)

The residual value of the shortage of fixed assets must be recovered according tothe decision on handling of shortage and the following accounts shall be recorded:

Dr 111, 112 (if collecting money)

Dr 334 – Payables to employees (deducted from salaries of employees)

Cr 3532 – Welfare fund.”

Figure 2.4: Accounting for Decrease in Tangible Fixed Assets by Liquidation,

Sale

2.2.1.5 Accounting for the Repair, Disposal of Tangible Fixed Assets

Circular No 45/2013/TT-BTC dated April, 25th, 2013 of the Ministry ofFinance indicated about several fluctuation cases of tangible fixed assets:

“Article 7 Investment, upgrade and repair of fixed assets:

1 The costs which enterprises have paid for upgrade of fixed assets are reflected

by an increase in primary price of such fixed assets These costs must not berecorded into the cost of business and productions in the period

2 The repair costs of fixed assets must not be calculated by an increase in primaryprice of fixed assets but are recorded directly or amortized into the business cost inthe period, but not exceeding 3 years maximally.

Article 8 Leasing, pledging, mortgaging, sale or disposal:

All activities of leasing, pledging, mortgaging, sale or disposal of fixed assetsmust comply with current regulations of law.”

About sale and liquidation of tangible fixed assets, Vietnamese AccountingStandard – VAS No 03 about tangible fixed assets (Issued and publicized togetherwith Decision No 149/2001/QĐ-BTC dated December, 31st, 2001 of the Minister

of Finance) emphasized that: “Tangible fixed assets which are liquidated or soldshall be recorded as a decrease Profits or losses arising from liquidation or sale oftangible fixed assets shall be determined as differences between incomes andliquidation or sale costs plus (+) the residual value of the tangible fixed assets.These profits or losses shall be recognized as an income or an expense on thereports on the business results in the period.”

International Accounting Standards (IAS) No 16 - Property, Plant andEquipment also mentioned about the derecognition (retirements and disposals) of

an asset: “An asset should be removed from the statement of financial position ondisposal or when it is withdrawn from use and no future economic benefits areexpected from its disposal The gain or loss on disposal is the difference betweenthe proceeds and the carrying amount and should be recognised in profit and loss.”

2.2.2 Accounting for Depreciation of Tangible Fixed Assets

2.2.2.1 Depreciation Methods of Tangible Fixed Assets

According to Vietnamese Accounting Standard – VAS No 03 about tangiblefixed assets: “Three methods of depreciation of tangible fixed assets are:

- Straight-line depreciation method;

- Declining-balance depreciation method; and

- Units-of-output depreciation method

By the straight-line depreciation method, the annual depreciation amount iskept unchanged throughout the useful life of assets By the declining-balancedepreciation method, the annual depreciation amount gradually declinesthroughout the useful life of assets The units-of-output depreciation method isbased on the estimated total quantity of product units the assets may turn out Thedepreciation method applied by the enterprises to each tangible fixed asset must be

implemented consistently, except where appear changes in the mode of its use.The enterprises must not continue depreciating tangible fixed assets which havebeen entirely depreciated but still used for production and business operations.”UnderCircular No 45/2013/TT-BTC dated April, 25th, 2013 of the Ministry ofFinance: “Methods of depreciation including:

a) Straight-line depreciation method

b) Adjusted reducing balance method

c) Method of depreciation based on volume

Based on the capacity to meet the applicable conditions specified for eachmethod of depreciation of fixed assets, the enterprises may choose method ofdepreciation appropriate with each type of enterprises’ fixed asset:

a) The straight-line depreciation method is the method of depreciation by the

rate of stability calculation of each year into the enterprises’ costs of business andproduction of the fixed assets involved in the business operation

- Determining the annual depreciation for the fixed assets by the followingformula:

Annual depreciation = Cost of fixed assets

Useful lives

- Monthly depreciation equal to the yearly depreciation divided by 12 months

b) Adjusted reducing balance method:

This method applies to the enterprises in areas with technology requiring rapidchanges and development The fixed assets involved in business operations aredepreciated by the adjusted reducing balance method must meet the followingconditions: - Being new fixed assets (not used);

- Being machinery, equipment, experimental and measuring instruments

Determining the annual depreciation of fixed assets in the years by thefollowing formula:

Annual depreciation =

Residual value of fixed assets x

Accelerated depreciation rate

In which: The accelerated depreciation rate is determined by the followingformula:

Over 4 to 6 years (4 years < t ≤ 6 years) 2.0

For the last years, when the annual rate of depreciation determined by thereducing balance method above mentioned is equal to (or lower) the average rate

of depreciation between the Residual value and remaining number of years ofutilization of fixed assets, then from that year, the rate of depreciation is calculated

by the Residual value of the fixed assets divided by the remaining number of years

of utilization of fixed assets The monthly rate of depreciation is equal to theyearly deducted depreciation divided by 12 months

c) Method of depreciation based on volume:

The fixed assets involved in business operations are depreciated by this methodare types of machinery and equipment meeting the following conditions:

- Directly related to product making;

- Determining the total number and volume of products made by designcapacity of fixed assets;

- The actual capacity per month in the fiscal year is not less than 100% ofdesign capacity

Determining the monthly depreciation of fixed assets by the followingformula:

Monthly depreciation =

Amount of products monthly made

x

Average rate of depreciation for a unit of product

In which:

Average rate of depreciation

for a unit of product =

Cost of fixed assets Output by design capacity

Annual depreciation of fixed assets is equal to the total rate of depreciation of

12 months in a year or by the following formula:

Annual depreciation =

Amount of products yearly made

x

Average rate of depreciation for a unit of product

In case the design capacity or primary price of fixed assets changes, theenterprises shall re-determine the rate of depreciation of fixed assets.”

2.2.2.2 Accounting Documentation, Accounting Book and Accounts

Applied

Main accounting documentation and accounting books used for the depreciation

of tangible fixed assets including:

- Detailed book;

- Ledger;

- Allocation table for depreciation of fixed assets

Account 214 is applied for the accounting for the depreciation of fixed assets.UnderCircular No 200/2014/TT-BTC dated December, 22nd, 2014 of the Ministry

of Finance: “Account 214 comprises the sub-accounts: Account 2141 –

Depreciation of tangible fixed assets: records the depreciation value of tangible

fixed asset during the using period and other increases or decreases of tangiblefixed assets

The structure of account 214: Debit: Decreases in depreciation of fixed assets,

investment properties because the fixed assets or investment properties areliquidated, sold, or transferred to other enterprises or contributed to other

enterprises as capital Credit: Increases in depreciation of fixed assets or

investment properties because the fixed assets or investment properties are

depreciated Debit balance: Accumulated depreciation of existing fixed assets or

investment properties of the enterprise

Method of accounting for several major transactions are:

+ Periodically, when calculating, deducting and recording fixed assets tooperating costs, the following accounts shall be recorded:

Dr 623, 627, 641, 642, 811

Cr 214 – Depreciation of fixed assets (appropriate sub-account)+ If there is any decrease in fixed assets or investment properties, decreases inboth historical costs of the fixed assets and depreciated value of the fixed assets orinvestment properties shall be recorded (refer to accounts 211, 213, and 217)

+ When calculating depreciation value of fixed assets for non-businessactivities at the end of the fiscal year, the following accounts shall be recorded:

Dr 466 – Non-business funds used for fixed asset acquisitions

Cr 214 – Depreciation of fixed assets+ When calculating depreciation value of fixed assets for cultural activities orwelfare at the end of the fiscal year, the following accounts shall be recorded:

Dr 3533 – Welfare funds used for fixed asset acquisitions

Cr 214 – Depreciation of fixed assets

+ Equitization of dependent accounting units of independent state-ownedcompanies, groups, general companies, parent companies, independent accountingunits of the general companies:

When transferring a fixed asset to the joint-stock company, an increase in assettransferred to joint-stock company shall be recorded, according to receipt slip ofassets, special appendixes on transfer of assets to joint-stock company andrelevant documents or accounting records:

Dr 411 – Owner's invested equity (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211, 213 (historical cost).”

Figure 2.5: Accounting for Depreciation of Fixed Assets

CHAPTER 3: THE CURRENT SITUATIONS OF ACCOUNTING FOR TANGIBLE FIXED ASSETS AND ITS DEPRECIATION AT

VIETNAM MULTIMEDIA CORPORATION

3.1 Overview of Vietnam Multimedia Corporation

3.1.1 History and Development

3.1.1.1 General Information

 Trading name: Vietnam Multimedia Corporation

 Company type: One Member Limited Liability Company

 Vietnamese title: Tổng Công ty Truyền thông Đa phương tiện Việt Nam

3.1.1.2 History and Development

Precursor of Vietnam Multimedia Corporation (VTC Corporation) was theService Factory of Repair and Warranty for Broadcasting Equipment which wasestablished on February, 12nd, 1988 by Decision No 33/QĐ-BTT of the Ministry

of Information On March, 25th, 1993, according to Decision No 288/QĐ of theMinister of Culture and Information, the Factory became the InformationTechnique Development and Investment Company (Intedico)

In December 1996, the Vietnam Television Technology Investment andDevelopment Company (VTC) was established on the basis of merging twocompanies (Ratimex and Telexim) into Intedico Company and under VietnamTelevision

On June, 26th, 2003, according to Decision No 129/2003/QĐ-TTg issued by thePrime Minister, the Vietnam Television Technology Investment and DevelopmentCompany (VTC) was transferred from Vietnam Television to the Ministry ofPosts and Telematics

This was an important milestone which marked the maturation of thecorporation During this period, VTC Corporation was the key logistic company inVietnam Television sector Its missions were researching, developing,manufacturing, consulting, supplying about equipments (to produce televisionprograms) and other technical equipments for television sector (which occupiedlarge market share in Vietnam) VTC Corporation contributed to the expansion oftelevision coverage on the national scale, brought guidelines and policies of theParty and State law to people who live in remote area, border area, and island area.This actions contributed to raising awareness, cultural life, and spirit of people inour country VTC Corporation was also the pioneer in science and technologyapplications through researching, consulting, technology transferring, andproviding equipments for the production of digital television programs thatcontributed to enhance production capacity to increase duration and quality oftelevision broadcasting nationwide

On July, 29th, 2005, the Prime Minister issued Decision No 192/2005/QD-TTg

to approve for Vietnam Television Technology Investment and DevelopmentCompany to become Vietnam Multimedia Corperation and to operate under themother-son model

On June, 28th, 2010, the Ministry of Information and Communications (MIC)enacted Decision No 929/QĐ-BTTTT According to this Decision, VTCCorporation (mother company) became One Member Limited Liability Company(State-owned Company) Decision No 1944/QĐ-BTTTT dated December, 14th,

2010 of MIC was enacted about approving Charter of Organization and Operation

of VTC Corporation During this period, VTC Corporation performed its business

on many fields such as: Communication, Journalism, Television,Telecommunication, and Information Technology

On October, 16th, 2013, the Prime Minister enacted Decree No 132 According

to this Decree, VTC Digital Television was transferred from VTC Corporation toMIC VTC Corporation focused on main sectors such as: Digital Content,Telecommunication Service, Television Service, and Information Technology Because of many achievements, the Party and the State recognized and awardedfor VTC Corporation with many noble titles such as: 03 “Hero of Labor inInnovation Period” titles for 02 collectives and 01 individual, 01 Second-classIndependence Order, 20 Labor Orders (include First-class, Second-class, and

Third-class Orders), many other awards, and titles from the Government and theMinistry of Information and Communications.

3.1.2 Business Operation and Organizational Structure

VTC Corporation is a wholly state-owned company; doing businessindependently as stipulated by the Enterprise Law and other regulations VTCCorporation is under the Ministry of Information and Communications Thecorporation performs business on many fields such as: Communication,Journalism, Television, Digital Content, Telecommunication, and InformationTechnology VTC Corporation strives to become a leading enterprise in digitalcontent service on the basis of multimedia infrastructure As a result, informationservice and entertainment service are dominant services VTC Corporation alsostrives to expand business domestically and internationally Operationalregulations of VTC Corporation is performed according to Decision No.1944/QĐ-BTTTT dated December, 14th, 2010 of MIC about approving Charter ofOrganization and Operations of VTC Corporation The company concentrates onthree main business sectors such as: (i) Information Technology and DigitalContent; (ii) Television; (iii) Telecommunication VTC Corporation mainlyfocuses on Digital Content service Technology and Infrastructure are importantfactors that promote the development of Digital Content service The companydevelops sustainably according to two phases: (i) Recovery phase until the end of2016; (ii) Development phase from 2017 Then, the company strives to implementequitization Organizational structure of VTC Corporation is presented according

to the following chart Function and responsibilities of each department of thecompany are shown as follows:

 Investment Department purchases fixed assets This department has a department which is called Legislation department

sub- Finance and Planning Department is responsible for finance, accounting andplanning that will be shown in more detail in part 3.1.4

 Personnel and Salary Department is responsible for construction, salary, andsocial insurance,…

 Corporate Office manages the building and security,…

 Copyright Center is in charge of communication and events of the corporation

 Research Center is responsible for software research and new technology

 Project Management Department is in charge of constructing the building

 Korean Official Development Assistance (ODA) Project ManagementDepartment implements the “Multimedia Center” Project

Figure 3.6: Organizational Structure of VTC Corporation

VTC Corporation has many member units Member units of VTC Corporationare divided into three types such as Subsidiaries, One Member Limited LiabilityCompanies (which VTC Corporation holds 100% legal capital), and Joint StockCompanies (which VTC Corporation holds over 51% legal capital) Subsidiariesinclude VTC Intecom, VTC Digital, and VTC Media One Member LimitedLiability Companies (which VTC Corporation holds 100% legal capital) includeVTC Digicom and VTC Comtech Joint Stock Companies (which VTCCorporation holds over 51% legal capital) include VTC Mobile, VTC EAC, andNetViet

3.1.3 Financial Position and Operational Results

This part will focus on analyzing the financial position and businessperformance of Vietnam Multimedia Corporation in 2013, 2014, and 2015 In thisthree years, business and operation situation of the company had many changes,especially in 2014 The organizational model of VTC Corporation changedsignificantly because the VTC Digital Television was transformed into a unitunder the Ministry of Information and Communications In addition, VTCCorporation continues to implement “VTC Corporation restructuring scheme inthe period of 2012-2015” which was approved according to Decision No 28/QĐ-BTTTT dated January, 11st, 2013 of the Minister of MIC VTC Corporationmerged two son companies which are one member limited liability company,completed the divestment procedure for two joint stock companies, conducteddissolved procedure for seven dependent accounting units which mostly operatedinefficiently