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below are the lists that are included in borrowing costs which I could not understand.
1. amortisation of ancillary costs incurred in connection with the arrangement of borrowings.
2. exchange of differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest cost.
sir can you pls elaborate above points
” activities necessary to prepare the asset for its intended sale or use extend further than physical construction work. They encompass technical and administrative work prior to construction. eg obtaining permits. they do not include holding an asset when no production or development that changes the asset’s condition is taking place, eg where land is held without any associated activity”
these lines are under commencement of capitalisation. can you pls explain me in simple lines. I could not get what those above lines mean?
1) any costs directly associated with the arrangement of the borrowed money should be capitalised and amortised as borrowing costs spread over the period that the project is scheduled to last
2) it’s not exchange of differences! It’s exchange differences from currency conversions and this will NOT feature in an F7 exam
This is simply telling you about the date the project is deemed to start and therefore borrowing costs become capitalisable from that date. This is not the date that the first shovel is pushed into the ground – it pre-dates that event. So activities like administrative matters and obtaining licences are treated as part and parcel of the project
Ok?
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