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Borrowing costs – specific borrowings example – ACCA Financial Reporting (FR)

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    • because out of 10 months, there was no construction during 1 month. so when we are capitalising we don’t include that month. 1/12 is used to know how much of expenditure is incurring for a month in a year.

  7. Could you please explain this for me?

    So based on the rules… i agree that 9/12 * 500 = 375 should be capitalised.
    But within those 9 months, 1 month does not qualify to be capitalised due to the ceased operations.

    So should the 1 month interest not be deducted from the 375 to give you capitalised interest of 333?

  9. Hi Chris

    Could you please explain me why did you count month instead of days?
    As I remember interests should always been calculated on a daily basis.
    And 1 month can consist of different days: October – 31, Septebmer – 30, February – 28/29

    Thanks,
    Igor

    • Bro igor why do you want to take complicated path see 5% is the depreciation charged per year so as we stopped the work for just 1 month we just need to look at months where the work is going on and charge depreciation for those months so if you cal “interest per day” or “interest per month” it doesn’t make much difference

  13. Hi, if both the construction and the loan commenced on the 1st march, should the interest not be based on 9/10 and 1/10 rather than 9/12 and 1/12 as the interest charged would not have been for a full 12 months in the financial period.

    Thanks

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