Notes to the consolidated Financial Statements

 

1. CORPORATE INFORMATION

 

Saigon Securities Incorporation (“the Company”) is a joint stock company established under the Corporate Law of Vietnam, Operating License No. 3041/GP-UB dated 27 December 1999 issued by Ho Chi Minh City People’s Committee and the first Business Registration No. 056679 dated 30 December 1999 issued by Ho Chi Minh City Department of Planning and Investment. The Company operates under Securities Trading License No. 03/GPHDKD issued by the State Securities Commission on 5 April 2000 and subsequent amended licenses.

 

The Company’s initial charter capital was VND 6,000,000,000. The charter capital has been supplemented from time to time in accordance with amended licenses. As at 31 December 2016, in accordance with the latest Amended License No. 02/GPDC-UBCK  granted by the Chairman of State Securities Commission, which has been effective since 12 January 2017, the Company’s total charter capital was VND 4,900,636,840,000.

 

The Company’s primary activities are to provide brokerage service, securities trading, underwriting for securities issues, custodian service, finance and investment advisory service and margin lending services. The Company’s Head Office is located at 72 Nguyen Hue Boulevard, District 1, Ho Chi Minh City, Vietnam. As at 31 December 2016, the Company has branches located in Ho Chi Minh City, Hanoi, Hai Phong, Vung Tau and Nha Trang, and transaction offices located in Ho Chi Minh City and Hanoi.

 

The number of the Company’s employees as at 31 December 2016 was 720 persons (31 December 2015: 616 persons).

 

Company’s operation

 

Capital

 

As at 31 December 2016, total charter capital of the Company is VND 4,900,636,840,000, owners’ equity including non-controlling interests is VND 7,152,567,156,682, total assets is VND 13,227,969,251,704.

 

Investment objectives

 

As the biggest listed securities company in Vietnam stock market, the Company’s principal activities are to provide brokerage service, securities trading, finance and investment advisory service, custodian service and underwriting for securities issues. The Company’s goals are to become a partner with clients, to focus all resource and initiatives to bring success to all stakeholders.

 

Investment restrictions

 

The Company is required to comply with Article 44 under Circular No. 210/2012/TT-BTC dated 30 November 2012 providing guidance on establishment and operation of securities companies, Circular No. 07/2016/TT-BTC dated 18 January 2016 amended some articles of Circular No. 210/2012/TT-BTC and other applicable regulations on investment restrictions. The current applicable practices on investment restrictions are as follows:  

  • - Securities company is not allowed to purchase, contribute capital to invest in real-estate assets except for the purpose of use for head office, branches, and transaction offices directly serving professional business activities of the securities company.
  • - Securities company may invest in real-estate investment and fixed assets on the principle that the carrying value of the fixed assets and real-estate investment should not exceed fifty percent (50%) of the total value of assets of the securities company.
  • - Securities company is not allowed to use more than seventy percent (70%) of its owners’ equity to invest in corporate bonds. Securities company, licensed to engage in self-trading activity, is allowed to trade listed bonds in accordance with relevant regulation on trading Government bonds.
  • Securities company must not by itself, or authorize another organization or individuals to: Invest in shares or contribute capital to companies that owned more than fifty percent (50%) of the charter capital of the securities company, except for purchasing of odd lots at the request of customers; Make joint investment with an affiliated person of five percent (5%) or more in the charter capital of another securities company; Invest more than twenty percent (20%) in the total currently circulating shares or fund certificates of a listing organization; Invest more than fifteen percent (15%) in the total currently circulating shares or fund certificates of an unlisted organization, this provision shall not apply to member fund certificates; Invest or contribute capital of more than ten percent (10%) in the total paid-up capital of a limited liability company or of a business project; Invest more than fifteen percent (15%) of its owners’ equity in a single organization or of a business project; Invest more than seventy percent (70%) of its total equity in shares, capital contribution and a business project, specifically invest more than twenty percent (20%) of its total owners’ equity in unlisted shares, capital contribution and a business project.
  • - Securities company is allowed to establish or purchase an asset management company as a subsidiary. In that case, securities company is not required to follow the above restrictions.
  •  

Subsidiaries

 

As at 31 December 2016, the Company had two (02) directly owned subsidiaries as follows:

 

 

Associates

 

As at 31 December 2016, the Company had three (03) indirectly owned associates presented on the consolidated financial statements as follows:

 

2. BASIS OF PRESENTATION

 

2.1. Applied accounting standards and system

 

The consolidated financial statements of the Company are prepared and presented in accordance with Vietnamese Enterprise Accounting System, the accounting regulation and guidance applicable to securities companies as set out in Circular No. 210/2014/TT-BTC dated 30 December 2014, Circular No. 334/2016/TT-BTC dated 27 December 2016 amending, supplementing and replacing Appendices No. 02 and No. 04 of Circular No. 210/2014/TT-BTC, Circular No. 146/2014/TT-BTC dated 6 October 2014 providing guidance on financial regime applicable to securities companies and asset management companies and other Vietnamese Accounting Standards promulgated by the Ministry of Finance as per:

- Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 1);

- Decision No. 165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 2);

- Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 3);

- Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 4); and

- Decision No. 100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 5).

 

2.2. Basis of consolidation

 

The consolidated financial statements comprise the financial statements of Saigon Securities Incorporation (the parent company) and its subsidiaries as at 31 December 2016.

 

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the parent company obtains control, and continued to be consolidated until the date that such control ceases.

 

The financial statements of the parent company and subsidiaries are prepared for the same reporting period using the consistent accounting policies.

 

All intra-company balances, incomes and expenses, and unrealized gains or losses resulting from intra-company transactions are eliminated in full.

 

Non-controlling interests represent the portion of profit or loss and net assets of the subsidiaries which are not held by the Company, and are presented separately in the consolidated income statement and within equity in the consolidated statement of financial position, separately from parent shareholders’ equity.

 

2.3. Registered accounting documentation system

           

The Company’s registered accounting documentation system is the General Journal Voucher system.

 

2.4. Fiscal year

 

The Company’s fiscal year starts on 1 January and ends on 31 December.

 

The Company also prepares its interim financial statements for the six-month period from 1 January to 30 June and its quarterly financial statements for the three-month periods ended 31 March, 30 June, 30 September and 31 December each year.

 

2.5. Accounting currency

 

The consolidated financial statements are prepared in Vietnam dong (“VND”), which is the accounting currency of the Company.

 

3. STATEMENT ON COMPLIANCE WITH VIETNAMESE ACCOUNTING STANDARDS AND SYSTEMS

 

Management confirms that the Company has complied with Vietnamese Accounting Standards and Vietnamese Enterprise Accounting Systems in preparing the consolidated financial statements.

 

Accordingly, the accompanying consolidated income statement, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in owners’ equity and notes to the consolidated financial statements, including their utilisation are not designed for those who are not informed about Vietnam’s accounting principles, procedures and practices and furthermore are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam.

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

4.1. Changes in accounting policies and disclosures 

 

On 30 December 2014, the Ministry of Finance issued Circular No. 210/2014/TT-BTC providing guidance on accounting policies applicable to securities companies (“Circular 210“). This Circular replaces Circular No. 95/2008/TT-BTC dated 24 October 2008 of the Ministry of Finance providing guidance on accounting policies applicable to securities companies and Circular No. 162/2010/TT-BTC dated 20 October 2010 amending and supplementing Circular No. 95/2008/TT-BTC. Circular 210 is applicable to fiscal years beginning on or after 1 January 2016. Circular 210 prescribes contents concerning accounting vouchers, system of accounting accounts as well as method of preparing and presenting the financial statements of securities companies.

 

On 27 December 2016, the Ministry of Finance issued Circular No. 334/2016/TT-BTC amending, supplementing and replacing Appendices No. 02 and No. 04 of Circular No. 210/2014/TT-BTC dated 30 December 2014 (“Circular 334“).

 

Circular 210 and Circular 334 lead to the following significant changes:

- Changes in name and content of the financial statements: balance sheet is renamed as statement of financial position, statement of cash flows from brokerage and trust activities of investors is separately presented as a part of the basic financial statements.

- Financial assets are categorised into four (4) groups: financial assets at fair value through profit and loss, available-for-sale financial assets, held-to-maturity investments and loans.

- Assets and liabilities of securities companies and investors (including deposits, securities investment and payable accounts) are separately managed.

In addition, Circular 210 and Circular 334 provide guidance on measurement of financial assets, particularly, all financial assets are initially recognized at cost and are subsequently recognized as follow:

- Financial assets at fair value through profit and loss (FVTPL): are recognized at cost. In case they are recognized at fair value, such recognition must comply with current Accounting Law. Gains or losses arisen from the revaluation of these assets are recognized in the income statement.

- Available-for-sale (AFS) financial assets: are recognized at fair value. Any gain or loss arisen from revaluation of AFS financial assets is recognized directly in owners’ equity (Other comprehensive income), except for provision for impairment in value of AFS financial assets.

As the fair value basis has not been allowed to be applied under the current Accounting Law, AFS financial assets are subsequently recognised at cost.

- Held-to-maturity (HTM) financial assets: are recognized at amortised cost based on effective interest rate method.

- Loans: are recognized at amortised cost based on effective interest method.

Circular 210 and Circular 334 are applied for fiscal years beginning on or after 1 January 2016.

 

The Company has restated the comparative figures of previous year in accordance with requirements of Circular 210 and Circular 334 as presented in Note 44.7 to the consolidated financial statements.

           

4.2. Standards and regulations issued but not yet taken effect

 

On 20 November 2015, the National Assembly of Vietnam passed the Law on Accounting No. 88/2015/QH13 (“the new Accounting Law“). The new Accounting Law extends its governing scope to electronic accounting documents and allows the application of fair value basis for some types of assets and liabilities whose value frequently varies in line with market fluctuation, provided that the fair value of these assets and liabilities can be reliably determined. The new Accounting Law takes effect from 1 January 2017.

           

4.3. Cash and cash equivalents

 

Cash and cash equivalents comprise cash on hand, cash at banks and short-term, highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash and that are subject to an insignificant risk of change in value.

 

Cash deposited by customers for securities trading and cash deposited by securities issuers are presented off-balance sheet.

 

4.4. Financial assets at fair value through profit and loss (FVTPL)

 

Financial assets recognized at fair value through profit and loss are financial assets that satisfy either of the following conditions:

 

a. It is classified as held for trading. A financial asset is classified as held for trading if:

- it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

- there is evidence of a recent actual pattern of short-term profit-taking; or

- it is a derivative (except derivative that is a financial guarantee contract or effective hedging instrument). 

 

b. Upon initial recognition, a financial asset is designated by the entity as at fair value through profit and loss as it meets one of the following criteria:

  • - The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the asset or recognising gains or losses on a different basis; or
  • - The assets and liabilities are part of a group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

 

Financial assets at FVTPL are initially recognized at cost (acquisition cost of the assets excluding transaction cost arising from the purchase) and subsequently recognized at cost less reduction in value arising from revaluation of the assets. Increase in value of the assets is not recognised into the financial statements as the prevailing Law on Accounting has not allowed the use of fair value basis. The reduction in value arising from revaluation is calculated as the difference between the cost of a financial asset at FVTPL and its market value determined in accordance with the guidance under Circular No. 146/2014/TT-BTC.

 

Increase in the negative difference arising from revaluation of financial assets at FVTPL is recognized into the consolidated income statement under “Loss from revaluation of financial assets at FVTPL”. Decrease in the negative difference arising from revaluation is recognized into the consolidated income statement under “Gain from revaluation of financial assets at FVTPL”.

 

Transaction costs relating to the purchase of the financial assets at FVTPL are recognized when incurred as expenses in the consolidated income statement.

 

4.5. 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 period of a financial assets 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 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 unrecoverable or there is uncertainty of recoverability, resulting from one or more events that has 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 difficulty, 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 income statement under “Provision expense for diminution in value and impairment of financial assets and doubtful receivables, and borrowing costs of loans”.

 

4.6. Loans

 

Loans are non-derivative financial assets with fixed or identifiable payments and not listed on the market, with the exceptions of:

  1. The amounts the entity 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 entity categorized as such recognized at fair, value through profit or loss statements;

  2. The amounts categorized by the entity as available-for-sale upon initial recognition; or

  3. 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 income statement under “Provision expense for diminution in value and impairment of financial assets and doubtful receivables, and borrowing costs of loans”.

 

4.7. 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:

  1. loans and receivables;

  2. held-to-maturity investments; or

  3. financial assets at fair value through profit or loss.

 

AFS financial assets are recognized initially at cost (acquisition cost plus (+) transaction costs which are directly attributable to the purchase of the financial assets). After initial recognition, available-for-sale financial assets are subsequently measured at cost less reduction in value arising from revaluation, as the prevailing Law on Accounting does not allow the use of fair value basis. Accordingly, the reduction in value due to revaluation is calculated by the difference between fair value and cost of the assets at the assessment date.

 

Any increase or decrease in the negative difference arising from the revaluation of AFS financial assets in comparision with previous 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.

 

As 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 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 include 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.

 

4.8. Fair value/market value of financial assets

 

Fair value/market value of the securities is determined in accordance with Circular No. 146/2014/TT-BTC 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 provision.

- For securities registered for trading on UPCOM, their market prices are their average closing prices on the trading day preceding the date of setting up the provision.

- For the 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 used as a basis for setting up the provision is the average of actual trading prices quoted by 3 securities companies conducting transactions at the latest date preceding the revaluation date.

For provision making purpose, fair value is the market price of the securities at the latest trading date which must be within one month to the date of provision making.

 

For securities which do not have reference price from the above sources, the impairment is determined based on the financial performance and the book value of securities issuers as at the assessment date.

 

4.9. Derecognition of financial assets

 

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; or

  • 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.

 

4.10. 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 “Gain/(loss) from revaluation of AFS financial assets” will be recognized as corresponding revenue or expenses at the date of reclassification of financial assets AFS.

 

Reclassification due to change in purpose or ability to hold

 

Securities companies are allowed to reclassify financial assets to their applicable categories if their purpose or ability to hold have 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 revaluated at fair value. The difference arising from revaluation between carrying value and fair value are recognized in the income statement under “Gain/loss from revaluation at fair value”.

 

4.11. 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 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 period 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.

 

4.12. 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.

 

4.13. 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:

 

 

4.14. 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 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 income statement.

 

4.15. 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 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 income statement.

 

4.16. 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:

 

 

4.17. 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 period is 27.5 years.

 

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

 

4.19. Prepaid expenses

 

Prepaid expenses, including short-term prepaid expenses and long-term prepaid expenses in the 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) years to three (3) years to the income statement:

- Office renovation expenses;

- Office rental expenses; and

- Office tools and consumables

 

 

4.20. Repurchase agreements

 

Securities sold under the agreements to be repurchased at a specified future date (“repos”) are not derecognized from the statement of financial position. The corresponding cash received is recognized in the 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 income statement over the life of the agreement using the straight-line method.

 

4.21. Borrowings and bonds issuance

 

Borrowings and bonds issued by the Company are recorded and stated at cost of the balance at the end of the financial year.

 

4.22. 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.

 

4.23. Employee benefits

 

4.23.1. 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 18% of an employee’s basic salary on a monthly basis. The Company has no further obligation to fund the post-employment benefits of its employees, other than the liability to pay Social Insurance Agency on a monthly basis.

 

4.23.2. Severance pay

 

The severance pay to employee is accrued at the end of each reporting period for all employees who have been in service for more than 12 months up to 31 December 2008 at the rate of one-half of the average monthly salary for each year of service up to 31 December 2008 in accordance with the Labour Code, the Law on Social Insurance and related implementing guidance. Since 1 January 2009, the average monthly salary used in this calculation will be revised at the end of each reporting period following the average monthly salary of the 6-month period up to the reporting date. Increase or decreases to the accrued amount other than actual payment to employee will be taken to the income statement.

 

This accrued severance pay will be used to perform payment to employee when terminating labour contract in accordance with the Labour Code.

 

4.23.3. Unemployment allowance

 

According to prevailing regulations, the Company is required to pay the unemployment insurance at 1% of salary fund of employees who engage in the unemployment insurance program and to deduct 1% from each employer’s basic salary to contribute to the Unemployment Insurance Fund.

 

4.24. 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 period, 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 period and arisen from the revaluation of monetary accounts denominated in foreign currencies at the end of the period are taken to the consolidated income statement.

 

4.25. Treasury shares

 

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

 

4.26. 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.

► If the gap between the banking buying rate and banking selling rate does not exceed 0.2%, the Company is allowed to apply the average exchange rate.

► All items on the 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 2% 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 financial statements.

 

4.27. 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

 

Where 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 period 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 dividend 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.

 

4.28. Borrowing costs

 

Borrowing costs include accrued interest and other expenses which are directly attributable to the Company’s borrowings and bonds issued.

 

4.29. Cost of securities sold

           

The Company applies moving weighted average method to calculate cost of equity securities sold and specific identification method to calculate cost of debt securities sold.

 

4.30. Corporate income tax

 

Current income tax

 

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted as at the report date.

 

Current income tax is charged or credited to the income statement, except when it relates to items recognized directly to equity, in which case the current income tax is also dealt with in equity.

       

Current income tax assets and liabilities are offset when there is a legally enforceable right for the Company to set off current tax assets against current tax liabilities and when the Company intends to settle its current tax assets and liabilities on a net basis.

 

Deferred income tax

 

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss.

 

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which deductible temporary differences, carry forward of unused tax credits and unused tax losses can be utilized, except where the deferred tax asset in respect of deductible temporary difference which arises from the initial recognition of an asset or liability which at the time of the related transaction, affects neither the accounting profit nor taxable profit or loss.

           

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to a certain extent that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Previously unrecognized deferred income tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset realized or the liability is settled based on tax rates and tax laws that have been enacted at the reporting date. Deferred tax is recorded to the income statement, except when it relates to items recognized directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxable entity and the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

 

4.31. Owners’ equity

 

Contributed capital from shareholders

 

Contributed capital from stock issuance is recorded in Charter Capital at par value.

 

Undistributed profit

 

Undistributed profit comprises of realised and unrealised undistributed profit.

- Unrealised profit of the period is the difference between gain and loss arisen from revaluation of financial assets at FVTPL or other financial assets through profit and loss in the consolidated income statement.

- Realised profit during the period is the net difference between total revenue and income, and total expenses in the income statement of the Company, except for gain or loss arisen from revaluation of financial assets recognized in unrealised profit.

 

Reserves

 

According to Circular No. 146/2014/TT-BTC issued by the Ministry of Finance on 6 October 2014, securities companies are required to make appropriation of profit after tax to the following reserves:

 

Other reserves are appropriated in accordance with the Resolution of the General Meeting of Shareholder.

 

4.32. Appropriation of net profits 

 

Net profit after tax is available for appropriation to shareholders after being approved by the General Meeting of Shareholders and after making          appropriation to reserve funds in accordance with the Company’s Charter and Vietnam’s    regulatory requirements. 

 

4.33. Nil balances

 

Items or balances required by Circular No. 210/2014/TT-BTC dated 30 December 2014, Circular 334/2016/TT-BTC dated 27 December 2016 and Circular No. 146/2014/TT-BTC dated 6 October 2014 issued by the Ministry of Finance that are not shown in these financial statements indicate nil balance.

           

 

5. CASH AND CASH EQUIVALENTS

 

 

6. VALUE AND VOLUME OF TRADING DURING THE YEAR

 

7. FINANCIAL ASSETS

 

Concepts of financial assets

 

Cost

 

Cost of a financial asset is the amount of cash or cash equivalents paid, disbursed or payable of such financial asset at its initial recognition. The transaction costs incurred directly from the purchase of financial asset might be included in the cost of the financial asset or not depending on the category that the financial asset is classified in.

 

Fair value/market value

 

The fair value or market value of a financial asset is the price at which the financial asset would be traded voluntarily between knowledgeable parties on an arm’s length basis.

 

The fair value/market value of securities is determined in accordance with Circular No. 146/2014/TT-BTC as described in Note 4.8.

 

Amortised cost

 

Amortized cost of a financial investment (which is debt instrument) 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).

 

For presentation purpose, provision for diminution in value or irrecoverability of financial assets is recognised in “Provision for impairment of financial assets and mortgage assets" in the statement of financial position.

 

Carrying amount

 

Carrying amount of a financial asset is the amount at which the financial asset is recognized in the statement of financial position. Carrying amount of a financial asset might be recognised at cost minus reduction in value due to revaluation (for FVTPL and AFS financial assets) or at amortised cost (for HTM investments and loans), depending  on the category that the financial asset is classified in.

 

7.1. Financial assets at fair value through profit and loss (FVTPL):

 

 

7.2. Available-for-sale (AFS) financial assets

 

 

7.3. Held-to-maturity investments (HTM)

 

 

7.4. Loans and receivables

 

(1) Securities under margin transaction are used as collaterals for the loans granted by the Company to investors. As at 31 December 2016 and 31 December 2015, the par value of those securities that are used as collaterals for margin trading was VND 5,207,197,455,000 and VND 5,221,587,690,000 respectively.

(2) These relate to brokerage contracts for selling bonds held by customers; whereby the Company advances to customers for the period that bonds are awaiting to be sold. These advances were reimbursed in 2016.

(3) The fair value of loans and receivables are measured at book value less provision for doubtful debt.

 

7.5. Change in market values of financial assets

 

 

Revaluated value is the fair value of securities for the purpose of financial statement presentation. This value is not recognized in the Company’s accounting book.

 

8. PROVISION FOR IMPAIRMENT OF FINANCIAL ASSETS AND MORTGAGE ASSETS

 

 

9. RECEIVABLES

 

 

10. OTHER SHORT-TERM ASSETS

 

 

(*) These represent short-term cost of investment relating to the contract between the Company and its customers for selling the shares of Hoang Anh Gia Lai International Agriculture JSC, previously known as Hoang Anh Gia Lai Rubber JSC. Accordingly, the customer will make payments to the Company in accordance with the payment schedule specified in the contract. The control of shares will be transferred to the buyer in line with the payment schedule. The underlying shares after transfer will be blocked and used as collateral assets for the contract. The value of investment awaiting for payback is determined as the difference between original costs of the investment sold, awaiting for payback and the provision for diminution in value of collaterals based on their market value at reporting date.

 

11. LONG-TERM INVESTMENTS

 

 

(1) As at 31 December 2016, term deposits with balance of VND 41 billion and maturity of more than 1 year are used as collaterals for short-term borrowings of the Company.

(2) As at 31 December 2016, among the investments in associates, 11,906,666 shares with par value of VND 119,066,660,000 are used as collaterals for bond issuance in phase 2 of 2015 and 6,607,271 shares with par value of VND 66,072,710,000 are used as collaterals for short-term borrowings of the Company.

 

Movements of investments in associates of the Company for the years ended 31 December 2016 and 31 December 2015 are as follows:

 

 

12. TANGIBLE FIXED ASSETS

 

 

13. INTANGIBLE FIXED ASSETS

 

 

14. INVESTMENT PROPERTIES

 

 

15. CONSTRUCTION IN PROGRESS

 

 

16. LONG-TERM PREPAID EXPENSES

 

 

17. DEFERRED INCOME TAX ASSETS AND PAYABLES

 

Deferred corporate income tax assets and deferred corporate income tax payables arise due to following temporary differences that are non-deductible in term of corporate income tax:

 

 

18. PAYMENT FOR SETTLEMENT ASSISTANCE FUND

 

Payment for settlement assistance fund represents the amounts deposited at Vietnam Securities Depository.

 

According to Decision No. 57/QD-VSD dated 28 May 2012 issued by the General Director of the Vietnam Securities Depository, Decision No. 87/2007/QĐ-BTC dated 22 October 2007 by the Minister of Finance regarding the issuance of regulations on registration, custody, clearing and settlement of securities, Circular No. 43/2010/TT-BTC dated 25 March 2010 amending and supplementing the regulations on registration, custody, clearing and settlement of securities, Decision No. 27/QD-VSD dated 13 March 2015 and Decision No. 45/QD-VSD dated 22 May 2014 on the promulgation of regulations on management and use of the settlement assistance fund by the General Director of the Vietnam Securities Depository; the Company must deposit an initial amount of VND120 million at the Vietnam Securities Depository and pay an addition of 0.01% of the total amount of brokered securities in the previous year, but not over VND 2.5 billion per annum.

 

Movements of the payment for settlement assistance fund during the year are as follows:

 

 

19. COLLATERALS AND PLEDGED ASSETS

As at the date of these consolidated financial statements, the following assets have been used as collaterals for borrowings:

 

 

20. SHORT-TERM BORROWINGS AND FINANCE LEASE LIABILITIES

 

 

21. BOND ISSUANCE

 

 

SSIBOND012015 are ordinary  bonds, issued in phase 1 in January 2015 under Resolution No. 02/2014/NQ/DHDCD dated 22 December 2014 with quantity of 1000 bonds and par value of VND500 million per bond. These are unsecured bonds, with a 2 year-term and a commitment to repurchase on every 6-month basis. Its interest rate, which was 8.2% per annum in the first year, will be adjusted in the subsequent year. In July 2015, the Company repurchased 225 bonds with total par value of VND 112,500,000,000. In 2016, the Company repurchased 623 bonds with total par value of VND 311,500,000,000.

 

SSIBOND022015 are the ordinary bonds, which were issued in phase 2 in April 2015 under Resolution No. 02/2014/NQ/DHDCD dated 22 December 2014 with quantity of  600 bonds and par value of VND500 million per bond. These bonds are collateralized using the Company’s listed shares and land use rights in accordance with the bond contracts. These bonds are secured in 2 years which bear interest at rate which is the maximum of 1.5% and the average interest rate of 12 months savings deposit denominated in VND, published by JSC Bank for Foreign Trade of Vietnam (operation center), JSC Bank for Investment and Development of Vietnam (operation center branch No. 1), JSC Bank for Industry and Trade of Vietnam (Hanoi branch) and Vietnam International Commercial Joint Stock Bank (Ly Thuong Kiet branch, Hanoi).

 

SSIBOND012016 are ordinary bonds, which were issued in phase 1 in August 2016 under Resolution No. 03/2016/NQ/HDQT dated 28 July 2016 with quantity of 200 bonds and par value of VND 1 billion per bond. These bonds are collateralized using the Company’s listed shares in accordance with the bond contracts. These bonds are secured in 2 years which bear interest at rate which is maximum of 1.2% per year and the average interest rate of 12 months savings deposit dominated in VND, published by JSC Bank for Foreign Trade of Vietnam (operation center), JSC Bank for Investment and Development of Vietnam (operation center branch No. 1), JSC Bank for Industry and Trade of Vietnam (Hanoi branch) and Vietnam International Commercial Joint Stock Bank (Ly Thuong Kiet branch, Hanoi).

 

22. PAYABLES FOR SECURITIES TRADING ACTIVITIES

 

 

23. PAYABLES TO SUPPLIERS

 

 

24. TAXATION AND STATUTORY OBLIGATIONS

 

 

 

25. ACCRUED EXPENSES

 

 

26. OTHER SHORT-TERM PAYABLES

 

 

27. LONG-TERM UNREALISED REVENUE

 

 

28. OWNERS’ EQUITY

 

28.1. Undistributed profit

 

 

28.2. Changes in owners’ equity

 

 

28.3. Profit distribution to shareholders

 

 

28.4. Shares

 

 

29. DISCLOSURE ON OFF-BALANCE SHEET ITEMS

 

29.1. Foreign currencies

 

 

29.2. Financial assets listed/registered for trading at Vietnam Securities Depository (“VSD”) of the Company

 

 

29.3. Non-traded financial assets deposited at VSD of the Company

 

 

29.4. Financial assets awaiting for arrival of the Company

 

 

 

29.5. Financial assets which have not been deposited at VSD of the Company

 

 

29.6. Financial assets listed/registered for trading at VSD of investors

 

 

 

29.7. Non-traded financial assets deposited at VSD of investors

 

 

29.8. Financial assets awaiting for arrival of investors

 

 

29.9. Financial assets unlisted/unregistered at VSD of investors

 

 

29.10. Entitled financial assets of investors

 

 

29.11. Investors’ deposits

 

 

29.12. Deposits of securities issuers

 

 

29.13. Payables to investors

 

 

29.14. Payables to securities issuers

 

 

29.15. Dividend, bond principal and interest payables

 

 

30. GAIN/(LOSS) FROM FINANCIAL ASSETS

 

30.1. Gain/(loss) from disposal of financial assets at FVTPL

 

 

 

30.2. Gain/(loss) from revaluation of financial assets

 

 

30.3. Dividend, interest income from financial assets at FVTPL, HTM investments, loans and receivables, AFS financial assets

 

 

31. PROVISION FOR IMPAIRMENT OF FINANCIAL ASSETS AND DOUBTFUL DEBTS

 

 

32. OTHER OPERATING REVENUE

 

 

33. EXPENSES FOR OPERATING ACTIVITIES

 

 

34. OTHER OPERATING EXPENSES

 

 

35. FINANCE INCOME

 

 

36. FINANCE EXPENSES

 

 

37. GENERAL AND ADMINISTRATIVE EXPENSES

 

 

38. OTHER INCOME AND EXPENSES

 

 

39. CORPORATE INCOME TAX

 

39.1. Corporate income tax (“CIT”)

 

The tax returns filed by the Company are subject to examination by the tax authorities. As the application of tax laws and regulations is susceptible to varying interpretations, the amounts reported in the financial statements could change later upon final determination by the tax authorities

 

The current tax payable is based on taxable profit for the year. The taxable profit of the Company for the year differs from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are not taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted by the reporting date. The Company is required to fulfil its corporate income tax obligation with the current tax rate of 20% (in 2015: 22%) on the total taxable profit according to Circular No. 78/2014/TT-BTC dated 02 August 2014.

 

The estimated current corporate income tax in this year and prior year is represented in the table below:

 

 

39.2. Deferred corporate income tax

 

Movement of deferred CIT assets during the year is as follows:

 

 

Deferred tax (income)/expense is charged to the income statement for the year ended 31 December 2016 and 31 December 2015 as follows:

 

 

40. ACCUMULATED OTHER COMPREHENSIVE INCOME

 

 

41. ADDITIONAL INFORMATION FOR STATEMENT OF CHANGES IN OWNERS’ EQUITY

 

Incomes and expenses, gains or losses which are recorded directly to owners’ equity:

 

 

42. DISCLOSURE OF STATEMENT OF CASH FLOWS

 

Non-monetary transactions which impact statement of cash flows and cash and cash equivalents managed by the Company but not in use

 

 

43. EARNINGS PER SHARE

 

Earnings per share is calculated by dividing the net profit after tax attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year. After tax profit attributable to ordinary shareholders of the Company for the year ended 31 December 2016 is calculated as after-tax profit after deduction for setting up non-shareholder reserves according to the actual appropriation ratio of 2015. For the purpose of compiling consolidated financial statements, other comprehensive incomes not yet included in the net profit after tax to calculate the earnings per share (EPS) indicator since there is no guidance detail.

 

 

44. OTHER INFORMATION

 

44.1. Transactions with related parties

 

List of related parties and relationships with the Company is as follows:

 

 

Significant balances and transactions with related parties as at 31 December 2016 and for the year then ended are as follows:

 

 

 

44.2. Segment information

 

 

 

Division reporting information by geographic area

 

Company's activities are mainly in the territory of Vietnam.

 

The Company has a wholly-owned US subsidiary, SSI International Incorporated ("SSIIC"), which operates in the US real estate business. However, SSIIC's total revenue, expenses and total assets are very low compared to its total revenue, expense and total assets (about 2% to 4%). As a result, the Company does not present segmental reports by geographical area in the notes to the consolidated financial statements

 

44.3. Operating lease commitments

 

The Company leases office under operating lease arrangements. As at 31 December 2016 and 31 December 2015, the committed future rental payment under the operating lease agreements is as follows:

 

 

44.4. Margin lending services

 

The Company signed margin lending contracts with investors to facilitate securities trading activities of investors.

 

The Company’s commitments to provide funds under outstanding margin lending contracts as of 31 December 2016 and 31 December 2015 are as follows:

 

 

44.5. Purposes and policies of financial risk management

 

The Company’s financial liabilities comprise mostly loans and borrowings, payables to suppliers and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company has loans, trade and other receivables, cash and short-term deposits that arise directly from its operations. The Company does not hold or issue derivative financial instruments.

 

The Company is exposed to market risk, credit risk and liquidity risk.

 

Risk management is integral to the whole business of the Company. The Company has a system of controls in place to maintain an acceptable balance between the cost arisen from risks and the cost of managing the risks. The management continually monitors the Company's risk management process to ensure that an appropriate balance between risk and control is achieved.

 

Management reviews and agrees policies for monitoring each of these risks which are summarized below.

 

Market risk

 

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. There are four types of market risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits and available-for-sale investments.

 

The Company manages market risk by analysing financial sensitivity of the Company as at 31 December 2016 and 31 December 2015. When analysing sensitivity, Management assumes that sensitivity of Available-for-sale debt instruments in the statement of financial position and other related items in the income statement is affected by changes in corresponding market risk. The analysis is based on financial assets and liabilities held by the Company as at 31 December 2016 and 31 December 2015.

 

Interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to market risk due to changes in interest rate relates primarily to cash and short-term deposits. Financial liabilities have fixed interest rate.

 

The Company manages interest rate risk by looking at the competitive structure of the market to identify a proper interest rate policy which is favourable for its purposes within its risk management limits.

 

No analysis on interest sensitivity is performed since the Company’s exposure to risk of changes in interest rate is insignificant.

 

Foreign exchange risk

 

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities in which revenue or expense is denominated in a different currency from the Company’s accounting currency and its investments in oversea subsidiaries.

 

The Company manages foreign exchange risk by hedging against transactions that are expected to take place in the future. The Company do not use any hedging instruments to mitigate foreign exchange risk.

 

Equity price risk

 

Listed and unlisted securities which are held by the Company are affected by market risk arising from the uncertainty of future value of invested securities. The Company manages equity price risk by establishing investment limits. The Company’s Investment Council considers and approves investments in securities.

 

As at the reporting date, the fair value of listed shares (FVTPL and AFS) was VND 2,632,964,025,790. The 10% increase (or decrease) in market index would possibly result in a corresponding increase (or decrease) in profit after tax of the Company, depending on its magnitude and length as well as the Company’s ownership position of securities which have significant influence on market index.

 

Credit risk

 

Credit risk is the risk that counterparty would not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for loans and receivables) and from its financing activities, including deposits with banks, foreign exchanges activities and other financial instruments.

 

Receivables

 

Customer credit risk is managed by the Company based on its established policies, procedures and control relating to customer credit risk management. Credit quality of customers is evaluated on the basis of Management’s assessment.

 

Outstanding customer receivables are regularly monitored. Customer credit quality’s impairment is analysed at each reporting date on an individual basis for major clients. The Company closely monitors outstanding receivables and operates a credit control unit to mitigate credit risk. Due to the fact that the Company’s receivables relate to a large number of diversified customers and corresponding collateral assets, there is no significant concentration of credit risk.

 

Bank deposits

 

The Company's bank balances are mainly maintained with high credit rating banks in Vietnam. Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. The Company’s maximum exposure to credit risk for the components of the statement of financial position at each reporting date is the carrying value as presented in Notes 5, 7.3 and 11. The Company evaluates the concentration of credit risk in respect to bank deposit as low.

 

Margin lending and advances to customers

 

The Company manages its credit risks via the use of internal control policies, processes and procedures relevant to margin lending and advance payments to customers. The Company assesses customers to determine their credit limits and margin rates before lending margin and advances to customers and periodically reassesses the financial position of customers to adjust the credit limits and margin rates accordingly. The credit limits are measured based on value of collateral assets, customer’s credit rating and other indicators.

 

The following loans considered as overdue as at 31 December 2015 (excluding of contracts that was extended or liquidated before the signing date of this report). Except for financial assets which are reserved for impairment as stated in Notes 8 and 9, according to the Management’s assessment, the remaining financial assets are neither overdue nor impaired as they are all liquid.

 

 

Liquidity risk

 

The liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligation due to shortage of funds. The Company’s exposure to liquidity risk arises primarily from mismatches of maturities of financial assets and liabilities.

 

The Company monitors its liquidity risk by maintaining a level of cash and cash equivalents, borrowings deemed adequate by the Management to finance the Company’s operations and to mitigate the effects of fluctuations in cash flows.

 

The below table summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

 

 

The Company assessed the concentration of risk with respect to its debt payment as low. The Company is able to access to different source of funds and all the borrowings which are due within 12 months can be renewed with the current lenders.

 

Collaterals

 

The Company used a part of the term deposits as collaterals for bank overdrafts and short-term borrowings from commercial banks. As at 31 December 2016, the total carrying value of term deposits used as collaterals for bank overdrafts were VND 1,602,000,000,000, and the total carrying value of term deposits used as collaterals for short-term borrowings were VND 3,607,100,000,000.

 

Among financial assets at fair value through profit and loss, financial assets available-for-sale and investment in associates as at 31 December 2016, there were 11,248,177 shares with the par value of VND 112,481,770,000 used as collaterals for short-term borrowings; and 30,196,266 shares with par value of VND 301,962,660,000 used as collaterals for bond issued by the Company.

 

Among non-current assets, land use right with infinite useful life at cost of VND 109,671,558,000 as at 31 December 2016 was used as collaterals for bonds issued in phase 2 of 2015.

 

The Company held securities as collateral for loans to customers as at 31 December 2016.

 

Other than that, the Company did not hold any other party's collateral at 31 December 2016 and 31 December 2015.

 

44.6. Off-balance sheet item of subsidiary

 

SSIAM, a subsidiary of the Company, conducts portfolio management activities. As at 31 December 2016 and 31 December 2015, SSIAM off-balance sheet items related to portfolio management activities of entrust investors include: deposits, portfolios, receivables and payables are as follows:

 

 

In particular, the list of securities in the portfolio of entrusted investors is reduced as follows:

 

 

44.7. Reclassification of comparative figures

 

During the year 2016, due to effects of changes in accounting policies and requirements for financial statement preparation and presentation in accordance with Circular 210 and Circular 334, certain corresponding figures in the financial statements for the previous year have been reclassified to compare with the current year’s presentation.

 

 

 

 

 

45. EVENT AFTER THE REPORTING DATE

 

As at 19 January 2017, the Company issued ordinary bonds (code: SSIBOND012017) with par value of VND 300 billion and no collateral under the Resolution No. 01/2017/NQ-HDQT dated 16 January 2017.

 

Other than the event disclosed above, there has been no matter or circumstance that has arisen since the reporting date which is required to be disclosed in the consolidated financial statements.