08-19-2006, 03:02 PM
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Abdur.Rehman</i>
<br />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"></font 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[)]
<br />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"></font 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[)]
