4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

4.9 Investments in associates 

 

An associate is an entity in which the Company has significant influence but that is neither subsidiaries nor joint ventures. The Company generally deems they have significant influence if they have over 20% of the voting rights.

 

The Company’s investments in associates are accounted for using the equity method of accounting. 

 

Under the equity method, the investment is initially carried in the consolidated statement of financial position at cost. In term of the acquisition, the difference between cost of the investment and the determinable net asset fair value in correspondence with the Company’s shares in associate at the acquisition date is defined as goodwill. Negative goodwill is recognized in “Other investment revenue (share of profits/(loss) in associates)” of the consolidated income statement.

Positive goodwill will be reflected in the value of investment in associate of the consolidated statement of financial position.

 

When determining the determinable fair value of net assets in associates, the Company applies principles and suppositions as follows:

 

 Fair value of cash and short-term deposit, payables to suppliers and other short-term liabilities approximates their carrying value due to their short term;

 

 Fair value of receivables is determined based on estimation of recoverability, therefore, the Company estimates fair value at the cost less provisions for receivables;

 

 Fair value of financial investments is determined at market prices;

 

 Fair value of fixed assets approximates their cost less accumulated depreciation 

 

 Fair value of the qualification in the auditors’ report in the audited financial statements of associates is determined as zero (0); and

 

 Fair value of other immaterial assets and debts is determined as their carrying value.

 

After the initial recognition, the investment is adjusted to changes of the Company’s share in associates’ post-acquisition net assets. The consolidated income statement reflects the share of the post-acquisition results of operation of the associates. Changes in net asset value of associates, including changes arisen from revaluation of fixed assets and investments, foreign exchange differences and differences arisen from consolidation of associates are not reflected in the consolidated income statement, but recognized directly in “Undistributed profit” in the consolidated statement of financial position.

 

The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividend receivable from associates is deducted from the carrying amount of the investment. 

 

The financial statements of the associates are prepared for the same reporting year as the Company, using the same accounting policies. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

 

4.10 Recognition of mortgaged financial assets 

 

During the year, the Company had mortgaged/pledged financial assets which are used as collaterals for financial obligations of the Company. 

 

According to the terms and conditions of the mortgage/pledge contracts, during the valid period of the contracts, the Company is not allowed to sell, transfer or use the mortgaged/pledged assets under repurchase or swap contracts with any other third party. 

 

In case the Company is unable to fulfil its obligations, the mortgagee/pledgee is allowed to use the mortgaged/pledged assets to settle the obligations of the Company after a period specified in the mortgage/pledge contracts, since the obligations due date.

 

The mortgaged/pledged assets are monitored in the Company’s consolidated statement of financial position in accordance with accounting principles relevant to the assets’ classification. 

 

4.11 Receivables 

 

Receivables are initially recorded at cost and subsequently always presented at cost.

 

Receivables are subject to review for impairment based on their overdue status or estimated loss arising from undue debts of corporate debtors who have bankruptcy or are under liquidation; or of individual debtors who are missing, have fled, are prosecuted, detained or tried by law enforcement bodies, are serving sentences or have deceased. Increases or decreases to the provision balance are recorded as “Provision expenses for diminution in value and impairment of financial assets and doubtful debts and borrowing costs of loans” in the consolidated income statement. 

 

The Company has made provision for doubtful receivables in accordance with Circular No. 228/2009/TT-BTC dated 7 December 2009 issued by the Ministry of Finance. Accordingly, the provision rates for overdue receivables are as follows:

 

 

4.12 Tangible fixed assets 

 

Tangible fixed assets are stated at cost less accumulated depreciation. 

 

The cost of a tangible fixed asset comprises of its purchase price and any directly attributable costs of bringing the tangible fixed asset to working condition for its intended use.

 

Expenditures for additions, improvements and renewals are added to the carrying amount of the assets and expenditures for maintenance and repairs are charged to the consolidated income statement as incurred.

 

When tangible fixed assets are sold or retired, any gain or loss resulting from their disposal (the difference between the net disposal proceeds and the carrying amount) is included in the consolidated income statement.

 

4.13 Intangible fixed assets

 

Intangible assets are stated at cost less accumulated amortization.

 

The cost of an intangible fixed asset comprises of its purchase price and any directly attributable costs of preparing the intangible fixed asset for its intended use.

 

Expenditures for additions, improvements and renewals are added to the carrying amount of the assets and other expenditures are charged to the consolidated income statement as incurred.

 

When intangible fixed assets are sold or retired, any gain or loss resulting from their disposal (the difference between the net disposal proceeds and the carrying amount) is included in the consolidated income statement.

 

4.14 Depreciation and amortisation  

 

Depreciation and amortisation of tangible and intangible fixed assets are calculated on a straight-line basis over the estimated useful life of each asset as follows:

 

 

4.15 Investment properties

 

Investment properties are stated at cost, inclusive of related transaction fees less accumulated depreciation.

 

Subsequent expenditure relating to an investment property that has already been recognised is added to the net book value of the investment property when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing investment property, will flow to the Company.

 

Depreciation and amortisation of the property is calculated on a straight-line basis over the estimated useful life of each asset. The depreciation year is 27.5 years.