THE MINISTRY OF FINANCE

CIRCULAR No. 77/1998/TT/BTC OF JUNE 6, 1998 GUIDING THE EXCHANGE RATE USED FOR CONVERSION OF FOREIGN CURRENCY(IES) INTO VIETNAM DONG IN THE COST-ACCOUNTING ACCOUNTANCY AT ENTERPRISES

In order to accurately reflect the costs of materials and goods, expenses, turnover, income and production and business results of enterprises, the Ministry of Finance hereby provides the following guidance on the exchange rate used for conversion of foreign currency(ies) into Vietnam "dong" in the cost-accounting accountancy at enterprises:

1. The exchange rate for conversion of foreign currency(ies) into Vietnam "dong"

Enterprises that have economic operations arising in foreign currency(ies) shall be entitled to convert the foreign curency(ies) into Vietnam "dong" at the actual average buying or selling rate on the inter-bank foreign currency market announced by the State Bank of Vietnam at the time such economic operations arise or at the actual buying and selling rates of the arising economic operations. In cases where an economic operation in foreign currency(ies) arises at a time when the inter-bank foreign currency market does not operate, the concerned enterprise shall be allowed to use the preceding day's average rates of the inter-bank foreign currency market.

1.1. The actual average inter-bank buying and selling rates shall apply to the conversion of all the following economic operations arising in foreign currency(ies) (except for economic operations specified in Point 1.2 of this Circular) into Vietnam "dong" for reflection into the accounting books and financial reports:

- Procurement of materials, goods and fixed assets in foreign currency(ies);

- Receipt and payment of joint venture capital contributions, receipt of aid in foreign currency(ies);

- Financial investment amounts in foreign currency(ies) such as joint venture capital contributions, securities investment... in foreign currency(ies);

- Sale expenses and turnover, income from financial activities, irregular income in foreign currency(ies);

- Operations of collecting or spending capital in foreign currency(ies);

- Amounts receivable or payable in foreign currency(ies);

- Re-evaluation of the foreign currency balance of accounts for cash capital at the end of each period, debts receivable and payable.

1.2. Economic operations arising in foreign currency(ies) shall be converted into Vietnam "dong" at the actual buying and selling rates in the following cases:

- Buying a foreign currency with the Vietnamese currency: Such foreign currency may be converted into Vietnam "dong" at the actual buying rate to be paid in Vietnam "dong".

- Selling a foreign currency for Vietnam dong: Such foreign currency may be converted into Vietnam "dong" at the actual selling rate to be collected in Vietnam "dong". The difference between the above-said selling rate and the average foreign currency rate used in the accounting books shall be accounted into Account 711 - Income from financial activities, or Account 811 - Expenses for financial activities.

2. For foreign currencies for which the State Bank of Vietnam does not announce their actual average buying and selling rates on the inter-bank foreign currency market for conversion into Vietnam "dong", they may be converted into Vietnam "dong" at the exchange rates applied in the calculation of import tax and export tax in Vietnam dong compared to those foreign currencies with their exchange rates announced by the State Bank of Vietnam.

3. Economic operations arising in foreign currency(ies) shall be reflected into the accounting books and financial reports in the Vietnamese currency at the exchange rate prescribed for this regime and according to the cost-accounting method prescribed in the enterprise accounting regime (issued together with Decision No. 1141-TC/QD/CDKT of November 1, 1995 of the Minister of Finance). The exchange rate difference shall be dealt with according to Circular No.44-TC/TCDN of July 8, 1997 of the Ministry of Finance.

4. For foreign-invested enterprises, if they are permitted by the Ministry of Finance to use a foreign currency unit in their accounting books and financial reports, their economic operations arising in Vietnam "dong" shall be converted into the foreign currency unit at the actual average buying and selling rates on the inter-bank foreign currency market announced by the State Bank of Vietnam. In cases where such an enterprise uses a foreign currency unit for which the actual average inter-bank buying and selling rates are not announced by the State Bank of Vietnam for conversion into Vietnam "dong", Vietnam dong shall be converted into such foreign currency at the rate applied to the calculation of export tax and import tax in Vietnam "dong" compared to a number of foreign currencies with their exchange rates announced by the State Bank of Vietnam.

5. This Circular shall apply to enterprises of all economic domains and sectors.

6. This Circular takes effect 15 days after its signing, all the previous provisions which are contrary to this Circular shall be hereby annulled.

If any problems arise in the course of implementation, they should be reported by enterprises to the Ministry of Finance for study and settlement.

For the Minister of Finance

Vice Minister

TRAN VAN TA