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Borrowing cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Borrowing cost

  • This topic has 1 reply, 2 voices, and was last updated 5 months ago by P2-D2.
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  • January 5, 2022 at 10:20 am #645335
    hm1995
    • Topics: 39
    • Replies: 8
    • ☆

    Hello

    I want to understand why is the specific borrowing cost for an asset capitalised rather than expensed? What is the explanation behind it?

    January 7, 2022 at 10:26 pm #645480
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi,

    We capitalise costs that are directly attributable to the asset. The borrowing costs are directly attributable as without using the loan to construct the asset then we would not have incurred the costs, hence the borrowing costs are capitalised as opposed to being expensed.

    Thanks

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