Some queries---FA 2 - Printable Version

Some queries---FA 2 - Printable Version

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- insaan - 08-17-2006

yaar ok u both mite hav different viewpoint
no problem
& perhaps i also cant convince U people
But JUst look Y IASB needed different paras givin treatment of specific & general borrowing
just b/c they r 2 be treated differently
BUT U are just treating both specific & general borrwing capitalisation in the same way

look the 2 paras
IAS 23.15
To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation on that asset should be determined as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings

IAS 23.17
To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation should be determined by applying a capitalisation rate to the expenditures on that asset

theek hai these 2 paras are different at all both in structure,in meaning etcetc..

If IAS JUst wanted treatment as U people r saying then wording of the capitalisation paras shud have been like this

4 specific borrowing
To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation on that asset should be determined by applying the specific borrowing rate to the expenditures on that asset

4 General borrwing
To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation should be determined by applying a capitalisation rate to the expenditures on that asset

NOW 1nce again look the difference

and look this with a viewpoint that i mite also be correct

+1 thing more
leave that PAC but ACCA solutions also follow my treatment
the teacher i am talking about is a very competent teacher...& i only say this abt him...not 4 our other acc.teacher
he is 4 the last 9 yrs teaching MOd C students,Mod F students (currently enrolled app 100 students),ACCA students and students hav been passing exam + achieving distinctions

- Abdur.Rehman - 08-18-2006

Ok i will further try to clarify the issue.
anyways the treatment regarding the expenditure incurred evenly throughout the years is as follows
First u divide the whole expense by 12 and then calculate interest by applying 12 month interst on that figure, then 11 month interest, then 10 month and so on.
I will look at ACCA solutions to clarify the other issue.

- rememberence - 08-19-2006

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by Abdur.Rehman
 lOOK at the first condition for capitalization i.e. the expenditure are being incurred. So, when the expense of 50 in April has not yet being incurred so how can u capitalize the expense of 50 that is incurred in May.
I have confirmed it and this is the right treatment. Plz consult a senior teacher in this regard.
The capitalisation of borrowing costs as part of the cost of a qualifying asset should commence when
(a) expenditures for the asset are being incurred;
(b) borrowing costs are being incurred; and
(c) activities that are necessary to prepare the asset for its intended use or sale are in progress.
<hr height="1" noshade id="quote"></blockquote id="quote">

Oh I couldnt read all discussion but the correct solution of the prob of IAS 23 is as follows

Borrowing cost of specific borrowing shall be capitalized from the day when

(a) expenditures for the asset are being incurred;
(b) borrowing costs are being incurred; and
(c) activities that are necessary to prepare the asset for its intended use or sale are in progress.

The main difference between specific and general borrowing's cost is that specific borrowing related cost shall be capitalized irrespective of the expenditure, but the upper mentioned criteria should be met. Logic behind it is that IAS says, the cost shall be capitalized which would have been avoided had the loan not been obtained for construction.

Restof the questions shall be answered inshAllah in collaboration with Abdur.Rehman as I am in hurry right now[)]

- insaan - 08-21-2006

AOA
As regards IAS 23 I hav had my say...so no more 2 say

bakee thx everybudy 4 cooperation & 4 help
Havin Exams next month
pray me me &
TC till then
ALLAH HAFIZ

- Abdur.Rehman - 08-21-2006

Best of luck
and our prayers are with u
but we need more than u, so also pray for us
Allah Hafiz