Account 321- Capital construction in progress

1. Accounting principles:

a) This account shall be designed for reflecting expenditures on implementing capital construction projects (including costs of purchase of fixed assets, new construction, repair, renovation or expansion of construction projects) and the financial finalization of capital construction projects. This account shall only be used during the capital construction period for recognizing input materials, tools and equipment intended for capital construction activities.

b) Expenditures on implementing capital construction projects (simply called capital construction expenditures) are defined as total costs necessary for new construction, repair, renovation, expansion or technical refurbishment of construction works. Capital construction expenditures shall be determined based on workload, set of economic-technical norms and criteria and state policies, must address objective market elements over periods of time and must be implemented according to regulations on capital construction management. Capital construction expenditures shall include:

– Construction cost;

– Equipment cost;

– Compensation, support and resettlement cost;

– Project management cost;

– Investment and construction consulting cost;

– Others.

The Account 321 may contain details of works or project items, each of which must record entries of contents of capital construction expenditures which are posted in a cumulative manner from the date of commencement to the date of completion, commissioning and transfer for use;

c) If fixed asset projects have already been brought into operation, but financial finalizations of these projects have not been completed yet, microfinance institutions can account for increases in historical costs of fixed assets according to their temporary value, based on actual construction expenses. After the financial finalization of capital investments is approved, in case of any difference arising in comparison to value of fixed assets which has been temporarily calculated, accountants may make increasing or decreasing adjustments in historical costs of fixed assets;

d) Costs incurred from repair, servicing and maintenance of normal operations of fixed assets shall be directly charged to business expenses within the accounting period. As for fixed assets that must be repaired, serviced or maintained periodically in conformance to technical requirements, accountants may set aside funds for provisions against accounts payable and charge them in advance to business expenses in order to cover costs of any repair or maintenance activities that may arise;

dd) In case investment projects are terminated, microfinance institutions must carry out the liquidation and recover costs already arising from these projects. The difference between actual costs and proceeds from such liquidation must be recorded as other expenses or may be recovered after determination of compensating responsibilities of involved organizations and individuals.

2. Account 321 can be subdivided into tier-2 and tier-3 subaccounts, including:

3211- Fixed asset purchases

3212- Capital construction costs

32121- Project costs

32122- Input materials used for capital construction

32123- Manpower costs

32129- Other costs

3213- Major repairs of fixed assets

3. Structure and entries of the account 321:

Debit side: – Costs of investment in capital construction, purchases and major repairs of fixed assets (including tangible and intangible fixed assets).

– Costs of renovation and improvement of fixed assets.

– Costs arising after the initial recording of fixed assets.

Credit side: – Value of fixed assets acquired through capital construction and purchase, and already completed and brought into operation.

– Value of eliminated projects and costs relating to approval of elimination of these projects which are carried forward once the financial finalizations of these projects are approved.

– Value of major repairs of fixed assets already completed and carried forward once the financial finalization of each repair is approved.

– Carry-forward of costs incurred immediately after the initial recording of fixed assets in relevant accounts.

Debit balance: – Total costs of investment projects for construction and major repairs of fixed assets in progress at end of an accounting period.

– Value of investment projects for construction and major repairs of fixed assets at end of an accounting period which have not been transferred for operation, or of which their financial finalizations have not been approved yet.

Detailed accounting: Accountants may use subaccounts for specific projects or project items.