4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

4.16 Operating lease

 

Whether an agreement is determined as a property lease agreement depends on the nature of the agreement at the beginning: whether the implementation of the agreement depends on the use of a certain asset and whether the agreement includes clauses on the use rights of the asset.

 

Rentals fee respective to operating leases are charged to the consolidated income statement on a straight-line basis over the term of the lease.

 

4.17 Prepaid expenses 

 

Prepaid expenses, including short-term prepaid expenses and long-term prepaid expenses in the consolidated statement of financial position, are amortised over the period for which the amounts are paid or the period in which economic benefits are generated in relation to these expenses.

 

The following types of expenses are recorded as prepaid expenses and are amortised over the period from one (1) year to three (3) years to the consolidated income statement:

 

 Office renovation expenses;

 

 Office rental expenses; and

 

 Office tools and consumables

 

4.18 Repurchase agreements

 

Securities sold under the agreements to be repurchased at a specified future date (“repos”) are not derecognized from the consolidated statement of financial position. The corresponding cash received is recognized in the consolidated statement of financial position as a liability. The difference between the sale price and repurchase price is treated as interest expense and is accrued in the consolidated income statement over the life of the agreement using the straight-line method. 

 

4.19 Borrowings and non-convertible bonds issued 

 

Borrowings and non-convertible bonds issued by the Company are recorded and stated at cost of the balance at the end of the accounting year.

 

4.20 Convertible bonds

 

Bonds that are convertible by the holder into a fixed number of ordinary shares of the entity are separated into financial liability and equity instrument based on the terms of the contract.

 

On issuance of the convertible bond, the fair value of the liability component is determined by discounting the future payment (including principal and interest) to present value at the market rate for an equivalent non-convertible bond less issuance cost. 

 

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity. The carrying amount of the conversion option is not re-measured in subsequent years.

 

Transaction costs related to convertible bon issuance are amortised during the lifetime of the bond using the effective rate method. At initial recognition, convertible bond issuance costs are deducted from the liability component of the bond.

 

4.21 Payables and accrued expenses 

 

Payables and accrued expenses are recognized for amounts to be paid in the future for bonds interest payables, goods and services received, whether or not billed to the Company.

 

4.22 Employee benefits

 

4.22.1 Post-employment benefits 

 

Post-employment benefits are paid to retired employees of the Company by the Social Insurance Agency, which belongs to the Ministry of Labour and Social Affairs. The Company is required to contribute to these post-employment benefits by paying social insurance premium to the Social Insurance Agency at the rate of 17.5% of an employee’s basic salary, salary-related allowances and other supplements. Other than that, the Company has no further obligation relating to post-employment benefits.

 

4.22.2 Severance pay

 

The Company has the obligation, under Section 48 of the Vietnam Labour Code 10/2012/QH13 effective from 1 May 2013, to pay allowance arising from voluntary resignation of employees, equal to one-half month’s salary for each year of employment up to 31 December 2008 plus salary allowances (if any). From 1 January 2009, the average monthly salary used in this calculation is the average monthly salary of the latest six-month period up to the resignation date.

 

4.22.3  Unemployment insurance  

 

According to Circular No. 32/2010/TT-BLĐTBXH providing guidance for Decree No. 127/2008/ND-CP on unemployment insurance, from 1 January 2009, the Company is required to contribute to the unemployment insurance at the rate of 1% of salary and wage fund of unemployment insurance joiners and deduct 1% of monthly salary and wage of each employee to contribute to the unemployment insurance.

 

4.23 Foreign currency transactions 

 

Transactions in currencies other than the Company’s reporting currency of VND are recorded at the actual transaction exchange rates of commercial banks at transaction dates. At the end of the year, monetary balances denominated in foreign currencies are determined as follows:

 

 Monetary assets are translated at buying exchange rate of the commercial bank where the Company conducts transactions regularly.

 

 Monetary liabilities are translated at selling exchange rate of the commercial bank where the Company conducts transactions regularly.

 

All foreign exchange differences incurred during the year and arising from the revaluation of monetary accounts denominated in foreign currencies at the end of the year are taken to the consolidated income statement.

 

4.24 Treasury shares

 

Equity instruments issued by the Company which are reacquired (treasury shares) are recognised at cost and deducted from owners’ equity. No gain or loss is recognised upon purchase, sale, issue or cancellation of the Company’s owners’ equity instruments.

 

4.25 Conversion of subsidiaries’ financial statements into parent company’s accounting currency

 

Subsidiaries’ financial statements which are prepared in the foreign currency that is different from the Parent Company’s accounting currency are converted into the Parent Company’s accounting currency for consolidation purpose. Actual transaction exchange rates used for converting subsidiaries’ financial statements are determined as follows:

 

 For assets, the exchange rate used for translation is the banking buying rate at the reporting date;

 

 For liabilities, the exchange rate for translation is the banking selling rate at the reporting date;

 

 In case difference between bank purchasing and selling rate at the reporting date is not over 0.2%, the applied exchange rate will be the average of purchasing and selling rate;

 

 All items on the consolidated income statement and cash flow statement are converted using the actual exchange rate at the time of the transaction. Average exchange rate is allowed to be applied if it approximates the actual exchange rate at the time of the transaction (the difference is 1% or less). If the gap between the exchange rate at the beginning of the year and at the end of the year is higher than 20%, the Company shall apply the exchange rate at the end of the year.

 

Foreign exchange rate difference arising from the translation of subsidiary’s financial statements is accumulatively reflected in “Foreign exchange rate difference” item of the Owners’ equity section of the consolidated statements of financial position.

 

4.26 Revenue recognition 

 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of receipts or receivables less trade discount, concessions and sales return. The following specific recognition criteria must also be met before revenue is recognised:

 

Revenue from brokerage services

 

When the contract outcome can be reliably measured, revenue is recognized by reference to the stage of completion. Where the contract outcome cannot be reliably measured, revenue is recognized only to the extent of the expenses recognized which are recoverable.

 

Revenue from trading of securities

 

Revenue from trading of securities is determined by the difference between the selling price and the weighted average cost of securities sold.

 

Other income

 

Revenues from irregular activities other than turnover-generating activities are recorded to other incomes as stipulated by VAS 14 – “Revenue and other income”, including: Revenues from asset liquidation and sale; fines paid by customers for their contract breaches; collected insurance compensation; collected debt which had been written off and included in the preceding year expenses; payable debts which are now recorded as revenue increase as their owners no longer exist; collected tax amounts which now are reduced and reimbursed; and other revenues.

 

Interest income

 

Revenue is recognized on accrual basis (taking into account the effective yield on the asset) unless collectability is in doubt.

 

Dividends
 
Income is recognized when the Company’s entitlement as an investor to receive the dividends is established, except for dividend received in shares in which only the number of shares is updated.
 
Properties leasing revenue
 
Properties leasing revenue is recognized into operational result on a straight-line basis over the leasing contract life. 
 
Other revenues from rendering services
 
Where the contract outcome can be reliably measured, revenue is recognised by reference to the stage of completion. 
 
Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses recognised which are recoverable.