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IAS 23 Borrowing costs

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › IAS 23 Borrowing costs

  • This topic has 3 replies, 2 voices, and was last updated 2 years ago by Kim Smith.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • February 26, 2023 at 7:26 am #679610
    ABDULLAHI312
    Participant
    • Topics: 106
    • Replies: 97
    • ☆☆☆

    Hi,
    in determining whether to capitalize the interest rates on the loan borrowed to finance the construction of an asset, the asset should take some time to construct. How long is this “some time”? Is it a period longer than a year?
    suppose a loan is taken in the year and the asset is due to be completed within the year(probably after 10 months), is it ideal to expense finance costs?

    February 26, 2023 at 7:49 am #679611
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8294
    • ☆☆☆☆☆

    It doesn’t have to be more than a year but consider that individual IFRSs only apply if material.

    Rather than building high-rise office blocks over several years, a company might build individual houses completed in several months. If the business has loan finance the cost of borrowing tied up in inventory is likely to be material and management would most likely want to capitalise interest, but misapplication could result in under or overstatement.

    February 26, 2023 at 9:27 am #679619
    ABDULLAHI312
    Participant
    • Topics: 106
    • Replies: 97
    • ☆☆☆

    ok got it.
    thanks

    February 26, 2023 at 9:51 am #679620
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8294
    • ☆☆☆☆☆

    You’re welcome!

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Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘IAS 23 Borrowing costs’ is closed to new replies.

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