Tangible fixed assets purchased in the exchange form

Tangible fixed assets purchased in the exchange form

accounting-services-in-vietnam220. The historical cost of a tangible fixed asset purchased in the form of exchange for a dissimilar tangible fixed asset or other assets shall be determined according to the reasonable value of the received tangible fixed assets, or that of the exchanged ones, after adjusting the cash amounts or cash equivalents which are additionally paid or received.

21. The historical cost of a tangible fixed asset purchased in the form of exchange for similar one, or possibly formed through its sale in exchange for the right to own similar ones (similar assets are those with similar utilities, in the same business field and of equivalent value).

In both cases no profit or loss is recognized in the exchange process. The historical cost of the received fixed asset shall be the residual value of the exchanged one. For example, the exchange of tangible fixed assets is similar to exchange of machinery, equipment, means of transport, service establishments or other tangible fixed assets.

Tangible fixed assets augmented from other sources

22. The historical cost of a tangible fixed asset which is donated or presented shall be initially recognized according to the initial reasonable value. Where it is not recognized according to the initial reasonable value, the enterprises may recognize it according to the nominal value plus (+) the expenses directly related to the putting of the assets into the ready-for-use state.

COSTS INCURRED AFTER INITIAL RECOGNITION

23. The costs incurred after the initial recognition of tangible fixed assets shall be recorded as increase in their historical cost if these costs are certain to augment future economic benefits obtained from the use of these assets. Those incurred costs which fail to meet this requirement must be recognized as production and business expenses in the period.

24. The costs incurred after the initial recognition of tangible fixed assets shall be recorded as increase in their historical cost if these costs have practically improved the current conditions of the assets as compared to their original standard conditions, such as:

a/ Replacing parts of the tangible fixed assets, thereby prolonging their useful life or increasing their use capacity;

b/ Renovating parts of the tangible fixed assets, thereby considerably improving the quality of manufactured products;

c/ Applying new technological production processes, thereby reducing the operational costs of the assets.

accounting-services-in-vietnam125. The repair and maintenance costs of tangible fixed assets for the purpose of restoring or sustaining their capability to bring about economic benefits as in their original operating conditions shall be included into production and business expenses in the period.

26. The accounting of the costs incurred after the initial recognition of tangible fixed assets must be based on each particular case and the recoverability of these costs. When the residual value of the tangible fixed assets has already been composed of reductions in economic benefits, those costs incurred afterwards to restore economic benefits from these fixed assets shall be included in the historical cost of the fixed assets if their residual value does not exceed their recoverable value.

Where the buying price of a tangible fixed asset has already covered the enterprises’ obligation to incur those costs for putting the assets into the ready-for-use state, the capitalization of the costs incurred afterwards must be also based on the recoverability of these costs.

For example, an enterprise buys a house which needs some repair before it can be used. The house repair cost shall be included in the historical cost of the asset if such cost is recoverable from the future use of the house.

27. Where some parts of tangible fixed assets need to be replaced on a regular basis, they shall be accounted as independent fixed assets if they satisfy all the four (4) criteria of a tangible fixed asset. For example, air-conditioners in a house may be replaced many times throughout the useful life of the house. The costs incurred in the replacement or restoration of these air-conditioners shall be accounted as an independent asset and the value of the replaced air-conditioners shall be recorded as a decrease.