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I jst wna knw that does ias 23 borrowing cost relate ONLY to SELF CONSTRUCTING ASSET ??…I HAVE ALSO SEEN THE STANDARD BT I COULDNT FIND anything with respect TO ACQUIRED ASSET …IT TELL THE TREATMENT OF ONLY SELF CONSTRUCTED ASSET as far as I READ it..so I JST wna knw that IS IT ONLY FOR SELF CONSTRUCTING ASSET NOT FOR ACQUIRED ASSET … RIGHT ????
” relate ONLY to SELF CONSTRUCTING ASSET”
“OF ONLY SELF CONSTRUCTED ASSET”
“ONLY FOR SELF CONSTRUCTING ASSET”
Do I understand correctly that your question is about a self-constructed asset?
This looks to me like an extract from the IAS 23 …..
“Accounting treatment
Recognition
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset and, therefore, should be capitalised. Other borrowing costs are recognised as an expense. [IAS 23.8]”
What do you think? Does it seem to you that where the extract says “…..attributable to the acquisition, construction or production ….” that it’s limited to SELF CONSTRUCTED ASSETS
If you are referring to a building company that is erecting a qualifying asset for a customer and the builder is borrowing money to fund the project, are you referring to the builder as the self-constructor? In that case, yes. It will always be the case that borrowing costs are capitalisable by the builder that is building and that has borrowed to finance the project
OK?
Oh, one last thing. Please don’t post your questions in upper case
Oh, and another last thing. It would be extremely good practice for you to ditch the computer speak and made the effort to type your words properly!
Ok bt u didnt understand my question :(..i jst wna ask that does this standard also tell abt the treatment of acquited asset apart frm self constructing asset ?…or standard tell treatment of self constructing asset only ?
Frm ur above comment it seems as if ur trying to say that it relates to both acquired ad well as self constructing asset bt may i ask lets suppose if we acquired a qualifying machinery for production, then when will we start to capital its interest cost and till what time we re suppose to keep capitalizing it…i have a idea abt self constructing asset bt nt sure abt acquired asset, thats why m askin. And finally i used upper case letter to emphasise on words..didnt mean to irritate any one 🙂
Ah, no. (Maybe I didn’t understand your original question because of the annoying computer-speak text!)
No, the standard doesn’t specify. But, think about it! It can only relate to the person doing the development / construction work
So I buy a plot of land having borrowed money to do it. Then I construct and develop a building that I can either use for myself or sell on to a customer.
Is that what you call self-construct? If so, then it applies to self-construct
Hi sir, i have a query regarding ias 23…i jst wna ask a simple question frm u lets suppose company has borrow 1million for the construction of asset..my question to u is that wt entries re we gonna make to bring the asset’s balance to 1 million ? According to my knowledge we will first make this entry Dr. Cash Cr. Liability bt this entry doesnt have any effect on my assets account balance it is still nill..hw will i bring my asset balance to 1m i mean by making what entry ?
By spending money to buy the materials and pay the workforce to build your asset and then that will be:
Dr Wages (building costs)
Cr CashDr materials (building materials)
Cr CashBt in ur above mention entries above none of ur entry affects the asset account so hw will it increase asset account balance to 1 million? In ur entries above ur debiting material and wages account nt asset account so hwz it gonna increase asset balance to 1 m??
Because the wages (building costs) and the materials (building materials) will not be debited to the statement of profit or loss. Instead they will be accumulated in the “Asset under construction account” or whatever name you wish to call it
R u trying to say that we will capitalize material costs and wages exp ?? if that is the case then y shouldnt we make such entry Dr Asset under construction account Cr cash account ??
Secondly if lets suppose company took a loan of 1m to set up a manufacturing plant, and buy land,buy machinery,construct building to set up that manufacting plant then may i ask hw will manufacturing plant balance will reach to 1m?…if u say that we re supposed to make such entries : Dr Land Cr Cash, Dr plant cr cash, Dr Building Cr cash if that is the case then my question will be that if we make such entires then none of it will increase asset account balance to 1m since no entry is affecting Manufacturing plant account rather it is affecting other different accounts,so hw will it increase asset (manufacturing account) balance to 1m??
“R u trying to say that we will capitalize material costs and wages exp ?? if that is the case then y shouldnt we make such entry Dr Asset under construction account Cr cash account ??” – Yes. Because we shall probably wish to keep a tight rein on expenditure and it’s better to keep different classes of expenditure separate
It won’t! The only bit of manufacturing plant that you included was “buy machinery” so, unless you spend $1 million “buying machinery” then you won’t be showing $1 million in your financial statements
Are you being deliberately stupid or were you exempt from F3 because some of your questions are very, very basic.
Well first of all i must say u words re quite Offensive and Humilating if u dnt wna ans me then u can straightaway tell me but there is no need to use words like Stupid etc..i ws not expecting u ppl atleast to use such words…extremely Disappointed wid ur response ..the fact of the matter is that there communication gap between us thats y u re unable to understand my prblm nd sometime i also find difficulty to understand ur ans ..EXTREMELY DISAPPOINTING BEHAVIOUR
Well, I too am unfortunately extremely disappointed in you. If you borrow $1,000,000 and spend it on things other than manufacturing plant, how can you get manufacturing plant to have a balance of $1 million?
That is below F3 level! If this is the level that you are at and you’re aiming to sit for F7 in December, may I respectfully suggest that that would be December 2016
Borrow $1 million, spend it on manufacturing plant and you have a balance of $1,000,000 in your manufacturing plant account
It is as simple as that
Part of the communication breakdown is your insistence on using computer speak in your posts. Do you have a natural aversion to typing out words in full or is your life so hectic that you cannot afford the time to spend on luxuries such as proper full spellings?
Do you see any of the PROFESSIONAL tutors on this (or any other site) resorting to such immature practice as computer-speak represents.
Anyway, enough! If your life is so full of activity I suggest that you ignore the $1 million manufacturing plant account and get on with whatever exciting activities are taking your attention
And good luck in December – I hope that there are at least 30 marks available for demonstrating how the balance on the manufacturing plant account could be anything different than $1 million if you have spent the money on other things!
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