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from the capitalized borrowing cost you deduct the investment income if out of the money borrowed some amount is invested somewhere else eg bonds
In kaplan you deduct the amount received as part of investment income when the borrowing cost are actually occured…
but in bpp from the month the amount has been invested and the income earned from it is being deducted from the borrowing cost and not only the income earned when the borrowing cost actually occur ..
why such a difference ?
Good question
Different writers appear to have differing opinions
My own script in the course notes is in line with the examiner’s own treatment as illustrated in his answer to a past exam question
I don’t have any idea where Kaplan nor BPP got their interpretations
So sir since your script is in line with the examiner’s comment what is the appropriate treatment?? I mean in your script you have written which method ?? the one given by kaplan or bpp ??
Neither Kaplan nor BPP (I think)
Borrowing costs are capitalised whilst incurred in the period during which work is being carried on on the qualifying asset
Following the consistency principle and the matching principle, income received from the temporary investment of surplus funds is set off against those borrowing costs time apportioned for the period during which work is actually being carried on and borrowing costs are being capitalised
Is that clear for you?
yup perfect.. thats what i have been doing before having a look in bpp so it raised a doubt ..
well thank you 🙂
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