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

VIVA Subject Guide
YouTube video

31 Comments

  1. Leo
    Hi

    It's Colombiaaa.
  2. Leo
    Hi

    It's Colombia.
  3. daniyal
    why do we expense out the cost for the month in which their is no activity?
  4. Irfan
    You still incur interest on the loan even when there is no construction taking place so that interest will need to be accounted for.
  5. Kartik
    How is the 10million loan taken treated in the financial statements?
  6. Claudia
    Loan is a liability.
  7. sara
    Hi All,
    Did someone manage to know why we use 9/10 and 1/10 instead of 9/12 and 1/12. I have all the above questions, but cant seem to find the answer? Can someone please very kindly reply ?
  8. Raj kumar singh
    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.
  9. Adam
    Hi Chris, what are the corresponding credit entries for both scenarios

    i.e
    Dr Asset
    Cr?

    Dr SPL Finance Costs
    Cr?

    Thanks
  10. Gerda
    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?
  11. manoj
    1st March to December are 10 months and out of 10 months one month was on strike. So in nutshell we have 9 months to capitalize and 1 month to expenditure.
  12. Ambuj
    Thanks
  13. igor1989
    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
  14. tejusmanoj
    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
  15. Mohamed Ismail
    Hello sir,

    Thank you very much for these lecture videos. My question is, why did we use 9/12 months to calculate amount to be capitalised and 1/12 months for amount to be expensed, instead of 9/10 and 1/10 respectively?
  16. kasiamat
    9 months out of 12
    1 out of 12 months
  17. ebimere
    why 12 month when the loan was from march 2015 and not January 2015
  18. lithuania
    Hi Ebimere,

    The rate of interest on the borrowing is based on 12 months' period, also called an annual percentage rate.

    Regards,
  19. Lucas
    I have the same question. We are capitalizing 9 months and charging another as an expense. What happens with the other 2 months?
  20. Mohamed Ismail
    Hello sir,

    Thank you very much for these lecture videos. My question is, why did we use 9/12 months to calculate amount to be capitalised and 1/12 months for amounts to be expensed, instead of 9/10 and 1/10 respectively?
  21. hammad
    Why 9/12 or 1/12 why it's should be 1/10 , 9/10
  22. Shane
    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
  23. ekhoza
    Hi Sir,
    Why are we using 9/12 and 1/12 when construction started in March till December?
    shouldn't it be 9/10 and 1/10?
  24. viethuynguyen
    If there is no additional information, u often understand the interest rate is annual rate.
    So 5% per year, 12 months.
  25. Petronella
    Easy to follow lecture . Thank you sir.
  26. kaadence
    So Sir, is that one month expense the month when there was no construction i.e. 1 Oct to 1 Nov? and if so, that's what we do? Expense whenever there is no construction?
  27. P2-D2Tutor
    Yes, that's correct. Always keep an eye out for it in any exam question.
  28. nokthu
    I have noticed that you calculated two answers one for sfop and I/S, is there supposed to be a double entry always?
  29. mk
    Sir why we use 10 months instead of 12 months?
  30. P2-D2Tutor
    Hi,

    The assumption is that the loan and construction both commenced on 1 March.

    Thanks
  31. ZulmaSupporter
    Thanks Chris.

    Just one thing. Colombia in South America is written Colombia, not Columbia. I say that because it's my country of birth. ;)

    Thank you SO much for your lectures. You all guys are amazing.

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