VIETNAM AIRLINES JSC SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

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Vietnam Airlines JSC
Separate financial statements for the year

ended 31 December 2017

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Vietnam Airlines JSC
Corporate Information

Establishment documents Decision No. 259/2006/QD-TTg dated 13 November 2006 of the Prime
Minister on establishment of the State-owned enterpri se - Vietnam
Airlines Corporation including member entities with dependent
accounting.

Decision No. 952/QD-TTg dated 23 June 2010 of the Prime Minister on
conversion of the Parent Company - Vietnam Airlines Corporation into
a State-owned one member limited liability company since 1 July 2010.

Deci sion No. 3207/QD-BGTVT dated 13 October 2016 of the Mini stry
of Transport on finalization of cash generated from equitization, cost for
equitization and revaluation of State capital at effective date of
equitization of Vietnam Airlines JSC.

Enterprise Registration 0100107518 20 March 2017
Certificate No.

The Enterprise Regi stration Certificate has been amended six times, the most recent of which is by the
Enterprise Regi stration Certificate No. 0100107518 dated 20 March 2017. The Enterprise Regi stration
Certificate was issued by Hanoi Department of Planning and Investment.

Board of Management Mr. Pham Ngoc Minh Chairman
Mr. Luu Van Hanh Member (until 31/10/2017)
Mr. Duong Tri Thanh M e mbe r
Mr. Ta Manh Hung Member
Mr. Nguyen Xuan Minh Member
Mr. Koji Shibata M e mb e r

Board of Directors Mr. Duong Tri Thanh President & CEO

Mr. Trinh Hong Quang Executive Vice President

Mr. Trinh Ngoc Thanh Executive Vice President

Mr. Le Hong Ha Executive Vice President

Mr. Nguyen Minh Hai Executive Vice President

Mr. Dang Ngoc Hoa Executive Vice President

Mr. Nguyen Thai Trung Executive Vice President (from 22/4/2017)

Mr. Phan Xuan Due Executive Vice President (until 30/11/2017)

J Mr. Nguyen Hong Linh Executive Vice President (from 1/12/2017)

Mr. Nguyen Ngoc Trang Executive Vice President (until 31/12/2017)

J Mr. Tran Thanh Hien Chief Accountant

J Registered Office 200 Nguyen Son Street

Long Bien Di strict, Hanoi

Vietnam

Auditor KPMG Limited

Vietnam

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Vietnam Airlines JSC
Statement of the Board of Directors

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n The Board of Directors of Vietnam Airlines JSC ("Vietnam Airlines") presents this statement and the

accompanying separate financial statements of Vietnam Airlines for the year ended 31 December

2017.

The Board of Directors is responsible for the preparation and fair presentation of the separate financial
'\ statements in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System

for enterprises and the relevant statutory requirements applicable to financial reporting. In the opinion

of the Board of Directors:

(a) the separate financial statements set out on pages 5 to 51 give a true and fair view of the

unconsolidated financial position of Vietnam Airlines as at 31 December 2017, and of the

unconsolidated results of operations and the unconsolidated cash flows of Vietnam Airlines for

') the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese

Accounting System for enterprises and the rele vant statutory requirements applicable to

financial reporting; and

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(b) at the date of this statement, there are no reasons to believe that Vietnam Airlines will not be
able to pay its debts as and when they fall due. / cc

T he Board of Directors has, on the date of this statement, authorized the accompanying separate ACHI

financial statements for issue. K

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KPMG Limited

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46 Floor, Keangnam Landmark 72

E6 Pham Hung Road, Me Tri Ward

South Tu Liem District, Hanoi, Vietnam

+84 (24) 3946 1600 I kpmg.com.vn

INDEPENDENT AUDITOR'S REPORT

l To the Shareholders

Vietnam Airlines JSC

We have audited the accompanying separate financial statements of Vietnam
Airlines JSC ("Vietnam Airlines"), which comprise the separate balance sheet as at
31 December 2017, the separate statements of income and cash flows for the year
then ended and the explanatory notes thereto which were authorised for issue by

Vietnam Airlines' Board of Directors on 2 6 MAR 201fflSset out on pages 5 to 51.

Management's Responsibility

Vietnam Airlines' Board of Directors is responsible for the preparation and fair 120

presentation of these separate financial statements in accordance with Vietnamese

Accounting Standards, the Vietnamese Accounting System for enterprises and the NG

relevant statutory requirements applicable to financial reporting, and for such internal ~l~M
control as the Board of Directors determines is necessary to enable the preparation
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of separate financial statements that are free from material misstatement, whether

due to fraud or error.

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Auditor's Responsibility

Our responsibility is to express an opinion on these separate financial statements
based on our audit. We conducted our audit in accordance with Vietnamese
Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about
whether the separate financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts

..) and disclosures in the financial statements. The procedures selected depend on the

auditor's judgement, including the assessment of the risks of material misstatement

of the financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to Vietnam Airlines'

preparation and fair presentation of the financial statements in order to design audit
) procedures that are appropriate in the circumstances, but not for the purpose of

..) expressing an opinion on the effectiveness of Vietnam Airlines' internal control. An

audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by Vietnam Airlines' Board of

Directors, as well as evaluating the overall presentation of the financial statements .

.) We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.

.)

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. ) KPMG Limited, a Vietnamese one member limited liability company and 3

a member firm of the KPMG network of independent member firms

affi!ia_ted wit.h KPMG International Cooperative ("KPMG Interna tional"),

..) a Swiss entity.

Auditor's Opinion

In our opinion , the separate financial statements give a true and fair view, in all material
respects, of the unconsolidated financial position of Vietnam Airlines JSC as at 31
December 2017 and of its unconsolidated results of operations and its unconsolidated cash
fl ows for the year then ended in accordance with Vietnamese Accounting Standards, the
Vietnamese Accounting System for enterprises and the relevant statutory requirements

applicable to financial reporting.

KPMG Limited

Pra Registration Doan Thanh Toan
Practicing Auditor Registration
Certificate No.: 0306-2018-007-1 Certificate No.: 3073-2014-007-1

Deputy General Director

Hanoi, 2 6 MAR 2018

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Vietnam Airlines JSC
Separate balance sheet as at 31 December 2017

~ FormB 01-DN

(Issued under Circular No. 200!201411T-BTC

("' dated 22 December 2014 ofthe Ministry of Finance)

I'""\ Code Note 31/12/2017 1/1/2017
VND VND
.........

ASSETS

Current assets 100 12,261,208,498,254 12,913,003,969,618

......... (100 = 110 + 130 + 140 + 150) 110 4 4,100,233,984,544 904,706,473,646
111 824,339,984,544 904,706,473 ,646
......... Cash and cash equivalents 112
Cash 3,275 ,894,0 0 0,000
Cash equivalents

Accounts receivable - short-term 130 7,481,818,982,769 11,413,000,962,136
Accounts recei vable from customers 2, 530,328 ,965 ,0 33 2,327,509,439,324
Prepayments to suppliers 131 5 4,518,975,402,003 8,705 ,721 ,445,923
Other receivables
Allowance for doubtful debts 132 6 456,858,917,606 403,918 ,226,540
(24,344,301 ,873) (24,148,149,65])
136 7(a)

137 8

Inventories 140 9 536,088,201,409 328,057,465,032
I n ve ntori es 141 604 ,5 0 2 ,201,409 328,057,465 ,032
Allowance for in ventories 149 (68,414,000,000)
267,239,068,804 :'~/"
Other current assets 150 143,067,329,532
Short-term prepaid expenses 151 l 5(a) 86,069 ,286,53 0 90,191 ,77 1,416
Deductible value added tax 152 56 ,99 8, 043, 0 02 117,382,44 1,645
Taxes receivable from
State Treasury 153 ' 59,664,855 ,743 'l
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Vietnam Airlines JSC

r"") Separate balance sheet as at 31 December 2017 (continued)

-. Form B 01-DN

(Issued under Circular No. 200/20 I417T-BTC
dated 22 December 2014 ofthe Ministry of Finance)

~ Code Note 31/12/2017 1/1/2017
VND VND

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Long-term assets 200 66,935,601,061,539 74,119,669,929,033

(200 =210 + 220 + 240 + 250 + 260)

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"'"') Accounts receivable - long-term 210 3,900,189,355,249 4,498,710,626,765

Prepayments to suppliers -

lon g-term 212 6 1,8 I2,099,336,087 2,435,873 , 162,405

Other long-term receivables 216 7(b) 2,088,090,019, 162 2,062,837,464,360

Fixed assets 220 52,987,436,435,293 59,299,658,158,742
Tangible fixed assets
Cost 221 IO 15,919 ,75 4 ,2 27 ,299 I9, 126, I80,275,847
Accumulated depreciation
Finance lease tangible fixed assets 222 24,667,249, 134,022 33,684,529,254,219
Cost
Accumulated depreciation 223 (8,747,494,906,723) (14,558,348,978,372)
Intangible fixed assets

Cost 224 I 1 36,974,510,362,914 40,074,687,176,382
Accumulated amortisation
225 53,392,380,549,661 53,403,999,739,544

226 (16,417,870,186,747) (13,329,312,563,162)

227 12 93,171,845,080 98,790,706,5 13

228 449,955,206,626 434,956,186,461

229 (356,783,361,546) (336, 165,479,948)

Long-term work in progress 240 25,045,757,525 200,604,209,687
Construction in progress 242 13 25,045,757,525
~ 200,604,209,687
Long-term financial investments 250 14 4,917,289,041,312
4,217 ,876,843,742 5,005,330,637,550
Investments in subsidiaries 251 4 , 175,847,768,900
1,423,461,764,579
Investments in associates, 1,436,433,935,387
191 ,211,140,573
joint-ve ntures 252 191,211 , 140,573
(9 I5,260,707,582)
Equity investments in (798, 162,207 ,3 I0)

other entities 253

Allowance for diminution in the value of

long-term financi al investments 254

Other long-term assets 260 5,105,640,472,160 5,115,366,296,289

._, Long-term prepaid expenses 261 15(b) 4,8 57,447 ,544,090 4,837,450,073,71 l

Long-term tools, suppli es and spare

..) parts 263 248, 192,928,070 277,9 16,222,578

...; TOTAL ASSETS (270 =100 + 200) 270 79,196,809,559,793 87,032,673,898,651

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The accompanying notes are an integral part of these separate financial statements

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Vietnam Airlines JSC

" Separate balance sheet as at 31 December 2017 (continued) Form B 01-DN

(Issued under Circular No. 200/2014/"lT-BTC

dated 22 December 2014 ofthe Minis1ry of Finance)

f""\ Code Note 31/12/2017 1/1/2017
VND VND
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RESOURCES

LIABILITIES (300 = 310 + 330) 300 62,266,148,311,687 70,730,734,200,195

Current liabilities 310 24,658,132,973,921 20,403,508,283,619
9,630,755,958,908 8,937,092,23 1,773
Accounts payable to suppliers 31 1 16 2 12,586,323,735 157,307,491,328

Advances from customers 312

Taxes and others payable to

State Treasury 313 17 44,339 ,060,567 66,819,359,706

Payables to employees 314 968,435,412,063 869,056,989,715

Accrued expenses 315 18 714,721,008,282 558,827,531,007 : 4,791,460,021 ,424 2,405 , I55,384,901 ~,;_9

Unearned revenue - short-term 3 18 19

Other payables - sho1t-term 319 20(a) 641,988,132,798 661 ,195,789,034 /c

Short-term borrowings and finance lease ~ 7,3 I8,825,559,796 6,686,028,787,358 '.RACf

li abilities 320 2 l (a) ]

Bonus and welfare funds 322 22 335,021,496,348 62,024,718,797

Long-term liabilities 330 37,608,015,337,766 50,327,225,916,576 l"<) -~

Other payables - long-term 337 20(b) 639 ,80 1, 130,272 806,680,5 I0,442

Long-term borrowings and finance lease

li abilities 338 2 1(b) 36,968,214,207,494 49,520,545,406, I34
16,930,661,248,106 16,301,939,698,456
EQUITY (400 = 410) 400

Owners' equity 410 23 16,930,661,248,106 16,301,939,698,456

Share capital 411 24 12,275,337,780,000 12,275 ,337,780,000

Ordinary shares with voting rights 411a 12,275,337,780,000 12,275,337,780,000

Share premium 412 1,220,852,256,54 l 1,220,852 ,256 ,5 4 1

Enterprise reorganization assistance fund 419 1,068 ,628,929,237 l ,068,628 ,929,237

Retained profits 421 2,365,842 ,282,3 28 l ,737, 120,732,678

Retained profits brought forward 421a 550,023, 689, 172 33,863,809,923

Retained profits f or the current year 421b 1, 815,818,593, 156 1, 703, 256,922, 755

...)

TOTAL RESOURCES 440 79,196,809,559,793 87,032,673,898,651
._) (440 = 300 + 400)

Prepared by: 2 6 MAR 2018

Ho Xuan Tam Tran Thanh Hien

Department of Finance and A ccounting ChiefAccountant

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::J The accompanying notes are an integral part of these separatefinan cial statements

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Vietnam Airlines JSC

,-.., Separate statement of income for the year ended 31 December 2017

,...... FormB 02-DN

(Issued under Circular No. 200!2014/7T-BTC

dated 22 December 2014 ofrhe Ministry of Finance)

'I Code Note 2017 2016
VND VND

Revenue from sales of goods and 01 27 63,966,517,457,222 56,993,105,191,413
provision of services

'""') 02 27 591,995,680,668 475,057,615,375

Revenue deductions

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Net revenue (10 = 01 - 02) 10 27 63,374,521,776,554 56,518,047,576,038

Cost of sales 11 54,930,400,904,947 47,589,779,009,725

~ 20 8,444,120,871,607 8,928,268,566,313 ..

Gross profit (20 = 10 - 11) t.

Financial income 21 28 1, 149,86 1,607,285 1,390,857,811,134 :c
Financial expenses
22 29 2,267,203, 120,395 3,628,897,705,2 10 i i
In which: Interest expense 23 l ,473,238,149,382 1,286,793,414,468 ,..

Se lling expenses 25 30 4 ,370,681,900,93 1 3,964, I 09,128,701 "'

General and administration expenses 26 3 1 1,434,752,667,612 1,492,022,49 1, 120

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Net operating profit 30 1,521,344,789,954 1,234,097,052,416
{30 = 20 + (21- 22) - (25 + 26)}

Other income 31 32 395, 12 1,755,803 479,700,148 ,099

Other expenses 32 5,370,690,] 07 2,823,536,8 18

Results of other activities (40 = 31 - 32) 40 389,751,065,696 476,876,611,281
50
Accounting profit before tax 51 34 1,911,095,855,650 1,710,973,663,697
(50 = 30 + 40)
95,277,262,494 7,716,740,942
Income tax expense - current

..... Net profit after tax (60 = 50 - 51) 60 1,815,818,593,156 1,703,256,922,755

..)

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..) Prepared by: 2 6 MAR 2018

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Ho Xuan Tam Tran Thanh Hien

J Department of Finance and Accounting ChiefAccountant

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:.) The accompanying notes are an integral part ofthese separate financ ial statements

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Vietnam Airlines JSC

I'"') Separate statement of cash flows for the year ended 31 December 2017

,.... (Indirect method)

Form B 03-DN

(Issued under Circular No. 200/2014/TT-BTC

dated 22 December 2014 ofthe Ministry of Finance)

........ 2017 2016

Code Note
) VND VND

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 01 1,911,095,855,650 1,710,973,663,697

Adjustments for

Depreciation and amortisation 02 4,792,372,256,176 4,835, 186,564,093

Allowances and provisions 03 185,708,652,494 765, 11 3,793,672

Exchange (gains)/losses ari sing from

revaluation of monetary items

denominated in foreign currencies 04 (60,248,266,922) 695,484,137,089

Profits from investing activities 05 (679,684,467,933) ( l ,029,732,340,050)

Interest expense 06 1,473,238,149,382 I,286,793,414,468 "'!

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Operating profit before changes in working capital 08 7,622,482,178,847 8,263,819,232,969 i~
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Change in receivables 09 4,643,093,117,047 2,259,434, 132,464 p

Change in inventories 10 (246,72 1,44 1,869) 304,225,764

Change in payables and other liabilities 11 3,35 1,196,387,077 2,059,432,577 ,202 !E

Change in prepaid expenses 12 (15,874,985,493) (388, 164,768, 127) :;::

Interest paid 14 15,354,175,255,609 12,194,825,400,272

Other payments for operating activities 17 ( I,500,53 1,430,533) ( 1,449,127,966,026)
( 177,579,999,155) (67,673,609,024)

Net cash flows from operating activities 20 13,676,063,825,921 10,678,023,825,222

CASH FLOWS FROM INVESTING ACTIVITIES

..) Pay ments for additions to fixed assets

and other long-term assets 21 (1 13,227,459,500) (8,840,8 19,428,526)

Proceeds from disposals of fi xed assets

and other long-term assets 22 1,6 10,730,033,3 10 283,89 1,800,4 10

Payments for in vestments in other

entities 25 (46,587,674,842) (753,289 ,627,895)

J Collections on investments in

..) other entities 26 2,9 15 ,300,000

Receipts of interests and dividends 27 677,957,974,375 I ,088,530,829,742

..)

Net cash flows from investing activities 30 2,128,872,873,343 (8,218,771,126,269)

The accompanying notes are an integral part of these separate financial statements
9

Vietnam Airlines JSC

Separate statement of cash flows for the year ended 31 December 2017

(Indirect method - continued) Form B 03-DN
r

(Issued under Circular No. 200/2014flT-BTC

dated 22 December 2014 ofthe Ministry of Finance)

Code Note 2017 2016
VND VND

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from equity issued 31 2,261 ,047,697,999
15,398,383,259,710
Proceeds from borrowings 33 8,342,294,882,527 (16,302,060,105,247)
(15,646,658,171 ,443)
Payments to settle loan principals 34

Payments to settle finance lease

li ab iliti es 35 (4,576,282,5 12,19 1) (4,791,497,458,122)
(736,520,266,800) (174, 129,922,303)
Payments of dividends 36

Net cash flows from financing activities 40 (12,617,166,067,907) (3,608,256,527,963)

Net cash flows during the year ,..~

50 3,187,770,631,357 (1,149,003,829,010) 1
(50 = 20 + 30 + 40) H
Cash and cash equivalents at the
beginning of the year 60 4 904,706,473,646 2,056,061,892,479 ~

Effect of exchange rate fluctuations on 61 ~

cash and cash equivalents 7,756,879,541 (2,351,589,823)

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Cash and cash equivalents at the end of the year (70 = 50 + 60 + 61) 70 4 4,100,233,984,544 904,706,473,646 =

Prepared by: 2 6 MAR 2016

._)

J Ho Xuan Tam Tran Thanh Hien
Department of Finance and Accounting ChiefAccountant

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The accompanying notes are an integral part of these separate financial statements
10

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Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017

Form B 09-DN

(Issued under Circular No. 200120/4/TT-BTC

n dated 22 December 20/4 ofthe Ministry ofFinance)

These notes form an integral part of and should be read in conjunction with the accompanying
separate financial statements.

1. Reporting entity

n (a) Ownership structure

Vietnam Airlines JSC ("Vietnam Airlines"), formerly a State-owned enterprise, was established
under Decision No. 259/2006/QD-TTg dated I3 November 2006 by the Prime Minister, including its
member entities with dependent accounting ("dependent entities").

Based on Decision No. 952/QD-TTg dated 23 June 2010 on conversion of the Parent Company -
Vietnam Airlines Corporation into a State-owned one member limited liability company from 1 July
2010, the Parent Company - Vietnam Airlines Corporation, operating as a State-owned enterprise,

was converted into Vietnam Airlines Corporation, operating as a one member limited liability
company.

According to the Enterprise Registration Certificate for One Member Limited Liability Company No.
01001075 I8 initially issued by the Hanoi Department of Planning and Investment on 30 June 2010
and the third amendment dated I April 20 I 5, the Parent Company - Vietnam Airlines Corporation
was converted into a joint stock company under the name of Vietnam Airlines Joint Stock Company
from] April 2015.

(b) Principal activities

The principal activities of Vietnam Airlines JSC include:

• Air transportation of passengers;

• Investment, management of investment capital , business operation; overseas investments;
purchase and sale of businesses; capital contribution or purchase of shares or share transfer, sale
of shares ;

• Air transportation of luggage, cargos, parcels, postal items and mails;

• Activities of general aviation (aerial photography of the terrain, geological surveys, lead flight

calibration of air stations, repair and maintenance of high voltage lines, serving oil and gas,

J afforestation, environmental testing, search and rescue, medical emergency, providing fli ghts

for political , economic, social and national defence tasks);

• Provision of commercial, tourist, hotel , duty-free shop services offered at airports and in other

J provinces and cities; other aviation services;

• Provision of technical services for commercial grou nd; other services at passenger terminals and

,._) cargo terminals and parking services at airports, airfields;

..) • Repair and maintenance of motor vehicles (except automobiles, motors, motorbikes and other

motorised vehicles): maintenance of aircraft, engi nes, spare parts, aviation equipment and other

..) technical equipment;

• Production of components, spare parts, materials for aircraft, technical equipment and others in

...) aviation industry;

• Provision of technical services, materials and spare parts for local and international airlines;

...)

:)
I 1

Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017
(continued)

Form B 09-DN

(Issued under Circular No. 200/20!4llT-BTC
dated 22 December 2014 ofthe Ministry ofFinance)

n • Provision of forwarding services, investment and exploitation of technical infrastructure at

airports: passenger and cargo terminals, technical infrastructure and synchronous services in

respect of air transport line;

• Multimodal transport;

• Export, import of aircraft, engines, spare parts, aviation equipment (rent, lease, hire purchase,

purchase and sale) and other goods as per the State regulations;

• Manufacturing, import and export of tools, instruments and equipment serving the air

transportation line;

• Manufacturing, processing, import and export of food to serve on plane;

• Export and import of oil , gasoline aviation grease (including fuel s, lubricants and dedicated

liquids) and other kinds of fuel;

• Supply of oil, gasoline, aviation grease (i ncluding fuels, lubricants and dedicated liquids) and

other kinds of fuel at airports;

• Gasoline retail agents;

• Provision of agent services to air carriers, aircraft engi ne, equipment and spare parts

manufacturers, domestic and foreign travel and transportation companies;

• Printing (except as prohibited by the State); T

• Construction and construction consultancy service (not including construction design); ~L

• Supply labor (excluding brokerage and referral, employment and labor supply for enterprises G

which have functions in respect of labor export and suppl y of labor, management of labor

working abroad); Import, export of labor;
:::

• Science and technology;

• Trade in real estate;

• Trade in e-commerce services; and

• Training; Finance and banking; Finance leasing (the enterprise operates only when permitted by

the State's competent authorities).

For business lines that the laws require certain conditions, Vietnam Airlines operates only when
meeting such business conditions.
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(c) Normal operating cycle

J T he normal operating cycle of Vietnam Airlines is generally within 12 months.

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Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017
(continued)

Form B 09-DN

(Issued under Circular No. 200/20/4/TT-BTC
dated 22 December 2014 ofthe Ministry of Finance )

(d) Corporate structure

As at 31 December 2017, Vietnam Airlines had dependent entities (including domestic and overseas
branches), subsidiaries and associates. A list of subsidiaries and associates is provided in Note 14.

Dependent entities of Vietnam Airlines include:

• Branch of Vietnam Airlines JSC - Heritage Magazine
• Branch of Vietnam Airlines JSC - Flight Crew 919
• Branch of Vietnam Airlines JSC - Cabin Crew
• Branch of Vietnam Airlines JSC - Noi Bai Operation Center
• Branch of Vietnam Airlines JSC -Tan Son Nhat Operation Center
• Branch of Vietnam Airlines JSC - Flight training Center
• Branch of Vietnam Airlines JSC - LotuSmile
• Branch of Vietnam Airlines JSC - Vietnam Air Service Company (VASCO)
• Northern Region Branch of Vietnam Airlines JSC
• Southern Region Branch of Vietnam Airlines JSC
• Central Region Branch of Vietnam Airlines y
• Branch of Vietnam Airlines JSC in Thailand u
• Branch of Vietnam Airlines JSC in Singapore

• Branch of Vietnam Airlines JSC in Malaysia

• Branch of Vietnam Airlines JSC in Laos

• Branch of Vietnam Airlines JSC in Cambodia

• Branch of Vietnam Airlines JSC in Japan
• Branch of Vietnam Airlines JSC in Republic of Korea
• Branch of Vietnam Airlines JSC in Hong Kong
• Branch of Vietnam Airlines JSC in Taiwan

• Branch of Vietnam Airlines JSC in Russia
• Branch of Vietnam Airlines JSC in Australia
• Branch of Vietnam Airlines JSC in Germany

• Branch of Vietnam Airlines JSC in France and West Europe

...) • Branch of Vietnam Airlines JSC in Canada

• Branch of Vietnam Airlines JSC in China

...)

• Branch of Vietnam Airlines JSC in USA

...) • Branch of Vietnam Airlines JSC in UK

• Branch of Vietnam Airlines JSC in Myanmar

..)

• Branch of Vietnam Airlines JSC in Indonesia

..)

As at 3 1 December 2017, Vietnam Airlines JSC had 6,708 employees (1/1/2017: 7,064 employees).

..)

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Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017
(continued)

Form B 09-DN

(Issued under Circular No. 20012014/TT-BTC
dated 22 December 2014 ofthe Ministry of Finance)

2. Basis of preparation

(a) Statement of compliance

These separate financial statements have been prepared in accordance with Vietnamese Accounting
Standards, the Vietnamese Accounting System for enterprises and the relevant statutory requirements
applicable to financial reporting. Vietnam Airlines prepares and issues its consolidated financial
statements separately. For a comprehensive understanding of Vietnam Airlines' consolidated
financial position, its consolidated results of operations and its consolidated cash flow s, these separate
financial statements should be read in conjunction with the consolidated financial statements.

(b) Basis of measurement

The separate financial statements, except for the separate statement of cash flows, are prepared on
the accrual basis using the historical cost concept. The separate statement of cash flows is prepared
using the indirect method.

~

-'- )

(c) Annual accounting period \

The annual accounting period of Vietnam Airlines JSC is from 1 January to 31 December.

(d) Accounting and presentation currency

Vietnam Airlines' accounting currency is Vietnam Dong ("VND"), which is a lso the currency used
for financi al statement presentation purpose.

3. Summary of significant accounting policies

J The following significant accounting policies have been adopted by Vietnam Airlines JSC in the

preparation of these separate financial statements.

...)

(a) Foreign currency transactions

..) Transactions in currencies other than VND during the year have been translated into VND at rates

approximating actual rates of exchange ruling at the transaction dates.

..J

J Monetary assets and liabilities denominated in currencies other than VND are translated into VND

at the average of the account transfer buying rates and selling rates at the end of the annual accounting

..) period quoted by the commercial bank where Vietnam Airlines most frequently conducts transactions
or at rates approximating actual commercial bank rates.

..) All foreign exchange differences are recorded in the separate statement of income. Unrealised foreign

-) exchange gains at the end of the annual accounting period are not treated as part of distributable

dividends to shareholders.

..)

:J 14

...)

Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017

(continued)
Form B 09-DN

(Issued under Circular No. 200/20 / 411T-BTC
dm ed 22 December 2014 ofthe Ministry of Finance)

(b) Cash and cash equivalents

,. Cash comprises cash balances, call deposits and cash in transit. C ash equi valents are short-term

highly liquid investments that are readil y convertible to known amounts of cash, are subject to an

insignificant ri sk of changes in value, and are held for the purpose of meeting short-term cash

commitments rather than for investment or other purposes.

(c) Accounts receivable

Trade and other receivables are stated at cost less allowance for doubtful debts.

(d) Inventories

Inventories are stated at cost. Where net reali sable value is lower than cost, inventories are stated at
net realisable value. Cost includes all costs incurred in bringing the inventories to their present
location and condition. Net reali sable value is the estimated selling price of inventory items, less the
estimated costs of compl etion and direct selling expenses .

The cost of spare parts and supplies received is calculated based on prices stated in suppliers '
commercial invoices and all related expenses (such as import duty, commi ssion fees, transportation
costs).

Unit price of aircraft spare parts and supplies for consumption is calculated using the specific
identification method.

The following principles are applied in allocating the costs of spare parts and supplies issued for
consumption:

For spare parts and supplies which are consumable, issued for one-time consumption
(unrepairable), issued price is charged to the production and business costs during the year

equalling the total value of such items .

For repairable and rotational spare parts whose unit price ranges from USD1 ,500 to USD50,000

..) issued for consumption, cost is recognised as long-term prepay ments on the separate balance

sheet and all ocated to production and business costs on a straight line basis over 3 years from

..) the first issuance.

..) For repairable and rotational spare parts whose unit price is more than USD50,000 issued for

consumption, cost is recognised as long-term prepayments on the separate balance sheet and

..) allocated to production and business costs on a straight line basis over 5 years from the first

issuance.

..)

Vietnam Airlines applies the perpetual method of accounting for inventories .

..)

Allowance for inventory is calcul ated in accordance with the prevailing accounting regulations which

..) allow provisions to be made for obsolete, damaged, or sub-standard inventories and for those with

costs higher than net realisable values at the end of the annual accounting period.

J

15

_)

Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017
(continued)

FormB 09-DN

(Issued under Circular No. 200/2014/TT-BTC
dated 22 December 2014 ofthe Ministry of Finance)

(e) Tangible fixed assets

J (i) Cost

Tangible fi xed assets are stated at cost less accumulated depreciation. The initial cost of a tangible
fixed asset comprises its purchase price, including import duties, non-refundable purchase taxes and
any directly attributable costs of bringing the asset to its working condition for its intended use. In
cases of tangible fixed assets being aircrafts, credits granted under aircraft purchase contracts are
recognised in accordance with the following principles:

• credit granted under aircraft purchase contracts being services is not recogni sed separately from
cost of the aircraft but as a decrease in cost of sales upon actual receipt;

• credit granted under aircraft purchase contracts being spare parts or equipment which V ietnam

') Airlines is not likely to receive is not recognised separately from cost of the aircraft but as a

decrease in cost of sales upon actual receipt;

• credit granted under aircraft purchase contracts being equipment which V ietnam Ai rlines is
like ly to receive with a detailed list for handover is recognised separately from cost of the
aircraft.

Expenditure incurred after tangible fixed assets have been put into operation, such as repair,
maintenance and overhau l cost, is charged to the separate statement of income in the year in which
the cost is incurred. In situations where it can be clearl y demonstrated that the expenditure has
resulted in an increase in the future economi c benefits expected to be obtained from the use of tangible
fi xed assets beyond their originally assessed standard of performance, the expenditure is capitalised
as an additional cost of tangible fix ed assets.

(ii) Depreciation

Depreciation is computed on a straight-line basis over the estimated useful lives of tangible fixed
assets. The estimated useful lives are as follows:

) • Aircraft 16 - 20 years

• Aircraft engines 10 years

..) • Buildings, structures 10 - 30 years

...) • Machinery, equipment 5 - 10 years
• Motor vehicles 7 - 10 years

..) • Office equipment 3 - 5 years

5 - 7 years
• Others

..)

...) (f) Finance lease tangible fixed assets

...) Leases in terms of which Vietnam Airlines assumes substantially all the risks and rewards of

ownership are classified as finance leases. Tangible fixed assets acquired by way of finance leases

...) are stated at an amount equal to the lower of fair value and the present value of the minimum lease

payments at inception of the lease, less accumulated depreciation.

Depreciation on finance leased assets is computed on a straight-line basis over the estimated useful

J li ves of items of the leased assets. The estimated useful li ves of finance leased assets are consistent

with the useful lives of tangible fixed assets as described in accounting policy 3(e).

)

16

..)

Vietnam Airlines JSC

Notes to the separate financial statements for the year ended 31 December 2017

(continued) Form B 09-DN
r

n (Issued under Circular No. 200/2014/7T-BTC
dated 22 December 2014 ofthe Ministry of Finance)

(g) Intangible fixed assets

(i) Land use rights

The initial cost of a land use rights acquired in a legitimate transfer comprises its purchase price and
any directly attributable costs incurred in conjunction with securing the land use rights. Land use
rights with indefinite term are not amortised.

(ii) Software

Software comprises passenger/cargo revenue manage ment software, cargo manage ment software and
accounting software. Cost of acquiring new software, which is not an integral part of the related
hard ware, is capitalised and treated as an intangible asset. Software cost is amortised on a straight-
line basis over 3 to 7 years.

(h) Construction in progress

Construction in progress represents the costs of construction and machinery which have not been
fully completed or installed. Construction in progress will be transferred to fixed assets at estimated
costs (if such costs have not been approved) when they are ready for use.

According to the State 's regulations on investment and construction management, the finali sed costs
of completed construction projects are subject to approval by appropriate level of competent

authorities. Therefore, the fi nal costs of these completed construction projects may change depending
on the final approval by competent authorities.

(i) Long-term prepaid expenses

(i) Overhaul expenses for aircraft engines and airframe

Overhaul expenses for aircraft engines and airframe are allocated to the state ment of income when

J the overhaul is completed. For leased aircraft engi nes, the expense awaiting allocation excludes the

amount from maintenance reserve paid by the lessor. Repair and maintenance expenses of airframe,

main engines, auxiliary power unit and aircraft landi ng gears incurred at USD300,000 or more are

allocated to the statement of income over 3 years. Maintenance expenses are fully recognized into

the statement of income during the year if incurred below USD300,000.

...) Overhaul expenses for aircraft engines provided under maintainance cost per hour contracts are

accrued and charged to the statement of income based on flight hours.

(ii) Export credit guarantee fee

Export credit guarantee fee in respect of financing contracts for aircraft purchase under fi nance lease

._) and other expenses relating to financing contracts are allocated to the statement of income on a

straight line basis over the duration of the finance lease contract.

J

17

Vietnam Airlines JSC
Notes to the separate financial statements for the year ended 31 December 2017
(continued)

Form B 09-DN

(Issued under Circular No. 200/20/4/lT-BTC
dated 22 December 2014 of the Ministry of Finance)

(iii) Tools and instruments

Tools and instruments include:

A ssets held for use by Vietnam Airlines in the normal course of business whose costs of
individual items are less than VND30 mjllion and therefore not qualified for recognition as fixed
assets under prevailing regulation. Cost of tool s and instruments are amorti sed over a period of
2 years;

Rotational spare parts allocated an nually (Note 3(d)).

(j) Investments

(i) Investments in subsidiaries, associates and jointly controlled entities and equity
investments in other entities arising during the pre-equitization period

In vestments in subsidi aries, associates and jointl y controlled entities and equ ity investments in other
entities arising during the pre-equitization period are recognised at the revaluated value upon
conversion of Vietnam Airlines into a joint stock company as at 3 1 March 2015 , which was approved
by the Ministry of Transport under the Decision No. 3207/QD-BGTVT dated 13 October 2016
("Decision 3207"). The revaluated value is considered the initial hi storical cost of the investments
when Vietnam Airlines was transformed into a joint stock company. Subsequent to initial recognition,
these investments are measured at historical cost less allowance for diminution in the value of
investments. Dividends or share of profit received which are attributable to the period before
equitization are deducted from the caffying amount of the in vestment.

(ii) Investments in subsidiaries, associates and jointly controlled entities and equity
investments in other entities arising during the post-equitization period

In vestments in subsidiaries, associates and jointly controlled entities and equity investments in other

entities arising during the post-equitization period are initially recognized at cost which include

J purchase price plus any directl y attributable transaction costs. Subsequent to initial recognition, the

investment in subsidiaries, associates and other entities are stated at cost less allowance for

J diminuti on in value.

...) (iii) Allowance for diminution in the value of investments

...) An allowance is made for diminution in investment values if the investee has suffered a loss, except

where such a loss was anticipated by Vietnam Airlines' management before making the investment.

J The allowance is reversed if the investee subsequently made a profit that offsets the previous loss for

which the allowance had been made. An allowance is reversed onl y to the extent that the in vestment's

...) carrying amount does not exceed the carrying amount that would have been determined if no

allowance had been recognised.

J

Allowance for diminution in value of investments in subsidiaries, associates, jointly controlled

J entities and other entities is made in accordance with Circular No. 228/2009/IT-BTC dated 7

December 2009 of the M ini stry of Finance guiding the appropriation and use of allowance for

...) diminution in value of inventories, loss of financial investments, doubtful debts and warranty for

products, goods and construction works at enterprises and Circu lar No. 89/2013/IT-BTC dated 28

._) June 20 I3 of the Ministry of Finance amending and suppl ementing Circular No. 228/2009/IT-BTC

.._.. and prevailing accounting regulations.

._

18

J

Vietnam Airlines JSC

Notes to the separate financial statements for the year ended 31 December 2017
(continued)

Form B 09-DN

(Issued under Circular No. 200/2014/'IT-BTC
da red 22 D ecember 2014 of the Minisrry of Finance)

(k) Trade and other payables

Trade and other payables are stated at their cost.

(I) Provisions

A provi sion is recognised if, as a result of a past event, Vietnam Airlines has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the liability.

Aircraft return obligation

Under the terms of aircraft operating lease contracts between Vietnam Airlines and lessors, Vietnam

Airlines has an obligation to return the aircraft to the same working order and conditions as at delivery

(except for normal wear and tear) upon returning the aircraft to lessors at the end of the lease period.

In accordance with Official Letter No. 11876/BTC-CDKT of Mini stry of Finance, Vietnam Airlines

can recognise costs for operating lease aircraft return when incurred or make provi sion for aircraft

return obligation over the lease period. Vietnam Airlines currently recognises costs for operating )

lease aircraft return when incurred.

(m) Unearned revenue from frequent flyer program

Vietnam Airlines implements its frequent flyer program, namely the Golden Lotus Program for
frequent customers, under whi ch such customers can accumulate points when purchasing goods or
services provided by Vietnam Airlines or specific participating vendors. The portion of revenue
derived from the accumulated reward points for which customers are expected to redeem shall be
determined at fair value and recogni zed as unearned. Unearned revenue is recognized in the state ment
of income in the year when customers redeem the points or upon expiry of the points.

(n) Share capital

J Ordinary shares

Ordinary shares are stated at par value. Incremental costs directly attributable to the issue of shares,
net of tax effects, are recognized as a deduction from share premium.

...)

J
J

19