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I see in all exercises the financial costs of the finance leasing is not captalized, actually thre exercises ment fair value about the leased object;
Questions:
1- As it is a fair value, the asset schould be overvalued with the finance costs right?
2- If I would capatalize the finance costs related to a acquisition, should I consider the Total amount of finance costs for the whole leasing period, or just accruing it according proportionally? If I do it, the probability of an asset is overvalued is praticly sure!!Finance lease interest is a finance charge – it’s not part of the capital cost of an asset. Therefore you should not capitalise it. In theory, if we were to win the lottery, we could turn round to the lessor and say “here’s the rest of the capital value that we owe you” and there would then be no further interest charges. In theory! Interest charges are therefore debited to I/S for each year, under the matching concept of setting expenses off against revenues in the year to which they relate
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