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Dear Sir,
When a company gets a loan from a bank, say $50m to construct a Hotel Project and to be completed at end of 3rd year.
I understand the effective rate interest on this $50m need to be capitalised to the Cost of Development when the project commence, ease if the project inactive, am i right?
How about the expenses, such as bank charged Front End Fee, Commitment Fee, Coordination fee, solicitors fees to prepare the agreement, other charges to the company, are these expenses need to be capitalised and amortised over the project period? Same treatment as to bank loan interest?
Please advise.
Any reference books relating to FRS 23 or IAS 23 that i can read up?Thank you.
Wow! There’s a question I have never been asked! I suppose I could answer it with a bit of research but why don’t you. May I suggest as a first port of call the http://www.iasplus website.
Check that out first and, if you have no luck there, post again
@annz2020 said:
Dear Sir,When a company gets a loan from a bank, say $50m to construct a Hotel Project and to be completed at end of 3rd year.
I understand the effective rate interest on this $50m need to be capitalised to the Cost of Development when the project commence, ease if the project inactive, am i right?
How about the expenses, such as bank charged Front End Fee, Commitment Fee, Coordination fee, solicitors fees to prepare the agreement, other charges to the company, are these expenses need to be capitalised and amortised over the project period? Same treatment as to bank loan interest?
Please advise.
Any reference books relating to FRS 23 or IAS 23 that i can read up?Thank you.
As stated in BBP text book, “borrowing costs are interest and other costs incurred by an entity in connection with the borrowing of the funds”. (IAS 23) So I will understand that all the directly attributable costs to the borrowing of the funds will be capitalised.
Thanks Mik for that input. If I were to wish to be 100% certain, I think I would do research into exactly what that meant. You see, for IFRS3 Business Combinations, the costs of any share issue made in connection with an investment / acquisition of a new subsidiary are to be treated as part of the cost of the investment in that new subsidiary and therefore capitalised, but the legal and professional costs associated with the acquisition are not to be capitalised but should be expensed in the year of acquisition
Annz, if you are really interested in this, a read through IAS 23 itself would help (and so too might http://www.iasplus)
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