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IAS 23

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IAS 23

  • This topic has 7 replies, 3 voices, and was last updated 9 years ago by MikeLittle.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • July 9, 2014 at 12:56 pm #178474
    kat
    Member
    • Topics: 11
    • Replies: 13
    • ☆

    Q1. If I acquired a qualifying asset using a loan, can I capitalised the interest or I need to charged the interest as an expense?

    Q2. If I acquired a subsidiary using a loan, can I capitalised the subsidiary?

    July 9, 2014 at 2:27 pm #178482
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    A1) Expense

    A2) “…can I capitalised the subsidiary?” Can you capitalise the SUBSIDIARY?!!!!!! !No!

    (and nor can you capitalise the loan interest incurred when you borrowed the money to finance the purchase)

    September 13, 2015 at 8:36 am #271550
    Jeffrey
    Participant
    • Topics: 0
    • Replies: 7
    • ☆

    G’day Mike,

    With reference to Kat’s Q1 & your A1, can I say that IAS 23 borrowing cost is only apply to own Asset under IAS 16 which take a substantial Period of time to get ready and does not apply to Acquired Asset? In another words, acquired of qualifying asset is not applicable?

    Furthermore, in regards to calculation of IAS 23, should the borrow cost (i.e finance cost) calculated as initial cost of asset using PVFCF
    [EIR x Cost x Months]?
    OR capitalized as and when borrow cost (finance cost) is incurred during the Qualifying period?
    OR both methods wrong?

    Seeking your advise on the above. Thanks!

    September 13, 2015 at 9:19 am #271553
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    It’s capitalised as and when borrowing costs are incurred ….. and, even then, it’s not ALL available for capitalising

    September 13, 2015 at 10:41 am #271565
    Jeffrey
    Participant
    • Topics: 0
    • Replies: 7
    • ☆

    G’day Mike,

    Thanks! Is the below presentation correct?

    SOFP as at 20X5
    PPE 1000

    SOFP as @ 20X6
    PPE 1100
    (plus borrowing cost $100).

    Entries to capitalise borrowing cost;
    Dr PPE. 100
    Cr Bank. 100

    September 13, 2015 at 5:22 pm #271636
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    Yes ……… except that there appears to be no work being carried on in the development, improvement, construction or acquisition of the qualifying asset and, if that assumption is correct, then no borrowing costs are available to be capitalised.

    So, no, it’s not correct

    September 13, 2015 at 5:30 pm #271640
    Jeffrey
    Participant
    • Topics: 0
    • Replies: 7
    • ☆

    G’day Mike,

    I like your reply.. it’s really make me think hard. ^^
    Well understood and thank you so much!

    September 14, 2015 at 8:06 am #271719
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    You’re welcome

  • Author
    Posts
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