What is the concept of fixed assets? Conditions and standards for recording fixed assets (TSCĐ) & learn specifically about types of tangible fixed assets and intangible fixed assets.
I. Legal basis
- Circular 45/2013/TT-BTC;
- Fixed Asset Accounting Standards;
- Circular 200/2014/TT-BTC;
- Circular 133/2016/TT-BTC;
II. Definition, conditions for recording and classifying fixed assets
1. Find out what the concept of fixed assets is?
Fixed assets (FA) include assets formed during the business operation and development process of an enterprise, with a usage, circulation, and recovery period of over 1 year or a multi-year business cycle, with large value gradually transferred to product value and management costs through depreciation costs. They can be in a state of not being used, being used, expired, or currently no longer in use.
2. Standards and conditions for recording fixed assets
According to Article 3, Circular 45/2013/TT-BTC, fixed assets must satisfy the following 3 factors:
- Enterprises use assets for business purposes and ensure that they will certainly gain economic benefits in the future;
- Minimum period of use is one year or more;
- The initial cost of the asset is determined based on invoices and documents with a value of VND 30,000,000 or more.
Note:
– In case an enterprise has a system consisting of many separate assets that operate together, each component is independent in terms of usage time, operating function, and separate monitoring and management, then each asset component must simultaneously satisfy the 3 fixed asset standards to be recorded as a tangible fixed asset;
– In case the asset is a working animal or a product-producing animal, each animal that simultaneously satisfies all three fixed asset criteria is recorded as a tangible fixed asset;
– In the case of perennial gardens, if the entire garden or each type of tree satisfies the 3 criteria of fixed assets, it is determined to be a tangible fixed asset;
– In particular, costs incurred during the implementation phase are recorded as intangible fixed assets created internally by the enterprise if they simultaneously satisfy the following conditions: ensuring the intended completion, technical feasibility, economic benefits in using and selling the asset, determining with certainty and clarity the cost of forming the fixed asset as well as the minimum time the asset can be used;
– In case of expenses incurred during business establishment, employee training, research phase, relocation, technical documents, patents, technology transfer licenses, trademarks, etc., they are not recorded as intangible fixed assets but are allocated directly to business expenses for a maximum period of no more than 3 years according to current regulations;
– For expenses that do not simultaneously satisfy all three criteria for recording fixed assets above, the enterprise shall directly account for them or gradually allocate them to the beginning of the expenses.
3. Classification of tangible fixed assets and intangible fixed assets
Classification of physical form of assets, fixed assets include tangible fixed assets and intangible fixed assets. In which:
3.1 Tangible fixed assets
➤ What are tangible fixed assets?
Tangible fixed assets are assets with physical form and clear shape, participating in many business cycles but still retaining their original physical form.
➤ Classification of tangible fixed assets
According to accounting standard No. 03, tangible fixed assets are classified according to purpose and nature of use, including:
- Construction works of houses, architectural materials: houses, offices, warehouses, halls, training and competition clubs, museums, conference culture, classrooms, lecture halls, hospitals, medical examination and treatment areas, nursing homes, warehouses, parking lots, all kinds of yards, swimming pools, wells, etc.;
- Machinery and equipment: Including specialized machinery, equipment, work equipment, etc.;
- Means of transport such as road, rail, water, air transport…
- Cars such as business cars, specialized cars, service cars, etc.;
- Management equipment and tools such as machinery and equipment used in offices, serving the operations of agencies, organizations and units; other specialized machinery and equipment;
- Perennial orchards, working animals or livestock for products;
- Some other types of fixed assets are not specified in detail.
Example 1:
Company A is a domestic wholesaler of consumer goods. To facilitate the distribution of goods to many provinces and cities, the company has implemented a plan to purchase 10 large-capacity trucks worth VND 245,000,000/truck (excluding VAT). The company has registered the vehicles under the company name. Regarding the criteria for recording fixed assets:
– Trucks have physical form, are purchased new, held and used by the enterprise;
– Used to transport goods ➞ brings future value to the business;
– Trucks are assets that can be used for many years;
– The original price of the asset is determined from the purchase price of VND 245,000,000 and vehicle registration and test run costs.
➥ Trucks that meet the above criteria for recording tangible fixed assets are recorded as tangible fixed assets. Enterprises need to record the increase in assets, separately track each purchased truck and depreciate according to the provisions of Circular 45/2013/TT-BTC.
3.2 Intangible fixed assets
➤ What are intangible fixed assets?
Unlike tangible fixed assets, intangible fixed assets do not have a defined physical form but represent an amount of invested value held and used by the enterprise in production, business, service provision, etc., satisfying the criteria for recording intangible fixed assets.
➤ Classification of intangible fixed assets
Types of intangible fixed assets include:
- Land use rights;
- Copyright and rights related to copyright;
- Industrial property rights such as ownership rights of individuals and organizations to inventions, industrial designs, etc.;
- Rights to agricultural plant varieties;
- Application software copyright;
- The brand of a public service unit, including factors such as capacity, quality, reputation, history, tradition and other factors capable of creating economic rights and benefits;
- Other intangible fixed assets not specified in detail.
Example 2:
Company A specializes in providing beverage services. To ensure the flavor and recipe are attractive to customers, the company purchased the copyright of the recipe for VND 200,000,000 (excluding VAT). Thus, the copyright of the recipe is recognized as an intangible fixed asset of the enterprise.
In addition to the above classification, depending on management purposes, businesses can also classify assets according to the following criteria for asset management purposes:
- Classification by purpose of use: Fixed assets for business, fixed assets for welfare…;
- Classification by usage status: Fixed assets in operation, fixed assets under maintenance, unused fixed assets, fixed assets awaiting liquidation…;
- Classification by source of formation: Fixed assets formed from owner’s equity, fixed assets formed from borrowing…
See also:
>> Accounting and depreciation of used fixed assets .
>> Accounting for repair and upgrade costs of fixed assets.
IV. Frequently asked questions about fixed assets
1. On May 26, 2022, Company B purchased a fixed asset, a Toyota car, from Company C with a purchase price excluding VAT of VND 1,200,000,000, registration fee of VND 132,000,000, car inspection fee of VND 240,000, and new issuance fee of VND 11,000,000. How is the original price of the car determined?
Original price of Toyota car = Purchase price excluding VAT + Registration fee + Inspection fee + New issuance fee.
➥ Original price of Toyota car = 1,343,240,000 VND.
2. In terms of the origin of fixed assets, what types of fixed assets are there?
When considering the origin of fixed assets, fixed assets will include the following types:
- Fixed assets from new purchases;
- Fixed assets are exchanged by the enterprise with other partners;
- Fixed assets built or produced by the enterprise itself;
- Fixed assets received from sponsorship, donations, gifts, and presents;
- Fixed assets are allocated and transferred between departments;
- Fixed assets received from shareholders.
3. If the company is in the software program research phase, are the costs in the research phase included in the original cost of intangible fixed assets?
According to Article 38 of Vietnamese Accounting Standards Standard No. 04 Intangible Fixed Assets, all costs incurred during the research phase are not recorded as intangible fixed assets but are recorded as production and business costs in the period.