4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
4.3 Held-to-maturity investments (HTM) 
 
Held-to-maturity investments are non-derivative financial assets with determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity other than:
 
a) those that the entity upon initial recognition designates as at fair value through profit or loss;
 
b) those that the entity designates as available-for-sale; and
 
c) those meet the definition of loans and receivables.
 
Held-to-maturity investments are initially recognized at cost (acquisition cost of the assets plus (+) transaction costs which are directly attributable to the investments such as brokerage fee, trading fee, issuance agency fee and banking transaction fee). After initial recognition, held-to-maturity financial investments are subsequently measured at amortized cost using the effective interest rate (“EIR”). 
 
Amortized cost of HTM financial investments is the amount at which the financial asset is measured at initial recognition minus (-) principal repayments, plus (+) or minus (-) the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus (-) any reduction for impairment or irrecoverability (if any).
 
The effective interest rate method is a method of calculating the cost allocation on interest income or interest expense in the year of a financial asset or a group of HTM investments. 
 
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial assets or financial liabilities.
 
HTM investments are subject to an assessment of impairment at the consolidated financial statements date. Provision is made for an HTM investment when there is any objective evidence that the investment is irrecoverable or there is uncertainty of recoverability, resulting from one or more events that have occurred after the initial recognition of the investment and that event has an impact on the estimated future cash flows of the investment that can be reliably estimated. Evidence of impairment may include a drop in the fair value/market value of the investment, indications that the debtors or a group of debtors are experiencing significant financial difficultly, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. When there is any evidence of impairment, provision for an HTM investment is determined as the negative difference between its fair value and amortized cost at the assessment date. Any increase/decrease in the balance of provision is recognized in the consolidated income statement under “Provision expense for diminution in value and impairment of financial assets and doubtful receivables, and borrowing costs of loans”. 
 
4.4 Loans
 
Loans are non-derivative financial assets with fixed or identifiable payments and not listed on the market, with the exceptions of:
 
a) The amounts the Company has the intent to immediately sell or will sell in a near future which are classified as assets held for trading, and like those which, upon initial recognition, the Company categorized as such recognized at fair value through profit or loss;
 
b) The amounts categorized by the Company as available-for-sale upon initial recognition; or
 
c) The amounts whose holders cannot recover most of the initial investment value not due to credit quality impairment and which are categorized as available-for-sale.
 
Loans are recognized initially at cost (disbursement amount of the loans). After initial recognition, loans are subsequently measured at amortized cost using the effective interest rate (“EIR”).
 
Amortized cost of loans is the amount at which the loans is measured at initial recognition minus (-) principal repayments, plus (+) or minus (-) the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus (-) any reduction for impairment or irrecoverability (if any).
 
Loans are subject to an assessment of impairment at the consolidated financial statements date. Provision is made for loan based on its estimated loss which is determined by the negative difference between the market value of securities used as collaterals for such loan and the loan balance. Any increase/decrease in the balance of provision is recognized in the consolidated income statement under “Provision expense for diminution in value and impairment of financial assets and doubtful receivables, and borrowing costs of loans”.
 
4.5 Available-for-sale (AFS)
 
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as:
 
a) loans and receivables;
 
b) held-to-maturity investments; or 
 
c) financial assets at fair value through profit or loss.
 
Available-for-sale financial assets are recognized initially at cost plus (+) transaction costs (which are directly attributable to the purchase of the financial assets). After initial recognition, AFS financial assets are subsequently measured at fair value.
 
Difference arising from the revaluation of AFS financial assets in comparison with previous year is recognized under “Gain/(loss) from revaluation of AFS financial assets” in “Other comprehensive income after tax” which is a part of the consolidated income statement.
 
At the consolidated financial statement date, the Company assessed whether there is any objective evidence that an AFS financial asset is impaired. Any increase/decrease in the balance of provision is recognized in the consolidated income statement under "Provision expenses for diminution in value and impairment of financial assets and doubtful debts and borrowing costs of loans".
 
Where an equity instrument is classified as available-for-sale, evidence of impairment includes a significant or prolonged decline in the fair value of the investment below its original cost. “Significant” is to be evaluated against the original cost of the asset and “prolonged” indicates the period in which the fair value has been below its original cost. When any evidence of impairment exists, provision is determined as the difference between the AFS asset’s cost and fair value at the assessment date. 
 
Where a debt instrument is classified as available-for-sale, the assessment of impairment is conducted using the same criteria as those applied for HTM investments. When there is any evidence of impairment, provision for an AFS asset is determined as the negative difference between its fair value and amortized cost at the assessment date.
 
4.6 Fair value/market value of financial assets
 
Fair value/market value of the securities is determined as follows:
 
For securities listed on Hanoi Stock Exchange and Ho Chi Minh City Stock Exchange, their market prices are their closing prices on the trading day preceding the date of setting up the revaluation.
 
For unlisted securities registered for trading on the Unlisted Public Company Market (“UPCOM”), their market prices are their average closing prices on the trading day preceding the date of setting up the revaluation.
 
For delisted securities and suspended trading securities from the sixth day afterward, their prices are the book value at the latest financial report date.
 
The market price for unlisted securities and securities unregistered for trading on the Unlisted Public Company Market (“UPCOM”) used as a basis for setting up the revaluation is the trading prices of the latest transaction on over-the-counter ("OTC") market.
 
For securities which do not have reference price from the above sources, the revaluation is determined based on the financial performance and the book value of securities issuers as at the assessment date.
 
For the purpose of determining CIT taxable profit, the tax bases for financial assets are determined by cost minus (-) provision for diminution in value. Accordingly, market value of securities for provision purpose is determined in accordance with the Circular No.146/2014/TT-BTC.
 
4.7 Derecognition of financial assets 
 
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when:
 
The rights to receive cash flows from the assets have expired;
 
The Company has transferred its rights to receive cash flows from the assets or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either:
 
the Company has transferred substantially all the risks and rewards of the assets, or 
 
the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
 
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement; and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
 
The continued participation in transferred assets in the form of guarantee will be recognized at smaller value between the initial carrying value of the assets and the maximum amount that the Company is required to pay. 
 
4.8 Reclassification of financial assets
 
Reclassification when selling financial assets other than FVTPL 
 
When selling financial assets other than FVTPL, securities companies are required to reclassify those financial assets to financial assets at FVTPL. The difference arising from the revaluation of financial assets AFS which was recognized in “Difference from revaluation of assets at fair value” will be recognized as corresponding revenue or expenses at the date of reclassification of financial assets AFS for selling purpose.
 
Reclassification due to change in purpose or ability to hold 
 
Securities companies are required to reclassify financial assets to their applicable categories if their purpose or ability to hold has changed, consequently: 
 
Non-derivative financial assets at FVTPL or financial assets that are not required to be classified as financial asset at FVTPL at the initial recognition can be classified as loans and other receivables or as cash and cash equivalents if the requirements are met. The gains or losses arising from revaluation of financial assets at FVTPL prior to the reclassification are not allowed to be reversed. 
 
Due to changes in purposes or ability to hold, some HTM investments are required to be reclassified into AFS financial assets and to be reassessed at fair value. The difference arising from revaluation between carrying value and fair value are recognized under “Difference from revaluation of assets at fair value” in Owners’ equity.