THE FOLLOWING ISSUES ARE TO BE NOTED IN RESPECT OF COST OF SALES

2. The following issues are to be noted in respect of cost of sales:

– Rental payments of VND2,000 million for the lease of equipment under a finance lease are included in the

cost of sales of manufacturing activities. The auditor is correctly proposing that only the interest of

VND200 million should be included in the cost of sales according to VAS, but this has not yet been reflected

in the draft Income Statement.

– Equipment valued at VND3,500 million in the inventory of the manufacturing activity was damaged by fire

on 20 July 2012. The equipment was insured but the insurer only agreed to pay VND2,500 million and

this amount was settled in full on 31 December 2012. The full book value of the equipment was written off

The incentives set out in this question are for illustrative purposes only, and are not necessarily in accordance with those set out in the regulations

prevailing at 2005.

in cost of sales, while the payment by the insurer was not recorded. The auditor proposed that payment

received from the insurer should be deducted to the amount already written off.

– Goods for trading activities valued at VND50,000 million were destroyed in a truck accident while in transit

before delivery to the buyer. These goods were not insured.

– 2011 Chinese New Year bonuses for all employees of VND2 million each were all included in the cost of

sales of the various businesses when paid in January 2012. HB has 700 employees in manufacturing, 150

employees in services, 100 employees in trading and 50 employees in administration and support. The

bonuses were not stated in either the Labour Contract or Collective Labour Agreement, but were mentioned

in a policy issued by the General Director at the end of 2011.

– Amortisation of VND1,500 million on the distribution right for a special equipment in Vietnam is included

in the cost of sales of trading activities. The terms of the distribution agreement with licensor are three years

(extendable to ten years) and HB amortised the right for three years for accounting purposes, as HB is not

certain of the extension. However, according to a recent specific guidance from the local tax authorities, the

right should be amortised over ten years for tax purposes.