Hi Mike,
When borrowing costs on a specifically borrowed fund do not qualify for capitalization (because active development on the qualifying asset has been suspended), where should the earned Investment income go?
I've always thought investment income earned during this period should be credited to profit or loss. Was I wrong?
Ask the Tutor ACCA FR
Borrowing cost
9y ago#1It's a matter of matching
Where we capitalise borrowing costs when work is continuing, we also reduce that amount capitalised by the related investment income
Similarly, when we can't capitalise borrowing costs because of a period of inactivity, we cannot reduce capitalisation of borrowing costs by the investment income
So, in periods of no construction activity, the costs are debited to Finance Costs in the Statement of Profit or Loss and the income is credited to Investment Income in the Statement of Profit or Loss
OK?
That's a relief, thanks for the detailed explanation! :)
9y ago#3You're welcome
Sign into reply to this topic.