Why buy from Apple, Samsung, Panasonic, LG,… Mobile World has to give these giants “debt” up to trillions of dong?

According to the recent consolidated financial statements of the fourth quarter of 2022, Mobile World Investment Joint Stock Company MWG announced, receivables from suppliers at the end of 2022 amounted to VND 2,023 billion, up 1.6 times compared to the beginning of the year. .

At the end of 2022, short-term receivables from suppliers accounted for 3.6% of total assets and 4.5% of current assets, respectively. These receivables come from big names such as LG Electronics Vietnam, Samsung, Apple, Panasonic Vietnam.

Some people will wonder, why does TGDD have receivables from its suppliers? As explained in the financial statements, these are receivables for trade discounts, settlement discounts and price protection.

In fact, trade discounts and payment discounts are common policies where buyers incentivize sellers to import goods and pay; price protection is a rather specific policy for the phone and electronic industry – items of great value but short life cycle, price reductions occur due to a rather fast mode error.

To put it simply, for businesses that buy goods, when they receive a discount because they buy in large quantities, it is called a trade discount, and when they pay early (before the contract’s deadline), they get a discount. This is called the payment discount.

For the most rudimentary transaction between two individuals buying and selling, the discount due to taking a lot or paying immediately can be deducted directly from the payment amount without having to record and track. But in the size of the business, according to the tax and accounting laws, the discounts do not have to be deducted so simply.

In trade discount , there are 2 ways, either discounting on each purchase, or discounting on total sales for a period of time, depending on the agreed policy between the two parties.

With regular and large volume importers like TGDD, it will be in the second way, being discounted by the supplier according to sales in a certain period of time (maybe a month, quarter or year).

At this time, the amount of the trade discount will be tracked on the receivable, not deducted directly from the invoice for each purchase.

With payment discount , this is a financial expense for the seller, requiring the buyer – the seller to make separate documents without directly reducing it on the sales invoice, so it is also tracked separately.

Regarding the price protection policy, Mr. Nguyen Lac Huy, a representative of CellphoneS communications, a person with 10 years of experience in the phone and electronics industry explained as follows:

” Price protection policy is understood that when the market has a change in price, the retailer will be compensated by the company or distributor for the difference. This usually happens when the price in the market drops.

Price protection policy is usually applied when there is a drop in price or a competition from a competitor. At this time, the company or distributor will base on the retailer’s inventory report to implement price protection.

Price protection typically comes in two basic forms: the firm determines the retailer’s remaining inventory and pays the price difference based on that inventory. In this case, the retailer does not need to do anything more than submit a report.

The second form is that the company will determine the amount of inventory protection, but to enjoy the price protection amount, the retailer will have to import a certain amount of goods, “said Mr. Nguyen Lac Huy.

In fact, there is no mandatory law, regulating the price protection policy that is like a practice in the retail industry. But it is even possible through a price protection policy to determine whether a company or a distributor is reputable or not – Mr. Huy added.

Although there exists a large balance of receivables with suppliers, on the other side of the balance sheet, TGDD has short-term payables to suppliers such as Apple, LG, Panasonic, Samsung, DGW, Daikin, others… up to VND 8,746 billion at the end of 2022, down 28% compared to the beginning of the year.