02-16-2010, 07:45 AM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
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The asset which is not a qualifying asset is supposed to be available for use at the date of acquisition (or soon after it), so its financing cost is associated with its operations and not with capitalization activity.
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I believe that this statement is not true for finance leases. The financing cost in case of finance lease to my understanding is not associated with the operations of the asset instead it is associated with the acquisition of asset so is a part of capitalization activity.
The point made by Ahmed appeals me that the finance cost relating to a qualifying asset is capitalized in pursuance with the requirements of IAS 23, and in case of finance lease, financing cost, obviously a directly attributable cost is not capitalized. And, he very aptly makes things simpler in his succeeding post that why only financing cost of qualifying assets are capitalized. Obviously, it has got to have some rationale behind it. However, the reasons provided by Mr. Kamran either are not exactly relevant or to complex for a person with my level of understanding.
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The asset which is not a qualifying asset is supposed to be available for use at the date of acquisition (or soon after it), so its financing cost is associated with its operations and not with capitalization activity.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I believe that this statement is not true for finance leases. The financing cost in case of finance lease to my understanding is not associated with the operations of the asset instead it is associated with the acquisition of asset so is a part of capitalization activity.
The point made by Ahmed appeals me that the finance cost relating to a qualifying asset is capitalized in pursuance with the requirements of IAS 23, and in case of finance lease, financing cost, obviously a directly attributable cost is not capitalized. And, he very aptly makes things simpler in his succeeding post that why only financing cost of qualifying assets are capitalized. Obviously, it has got to have some rationale behind it. However, the reasons provided by Mr. Kamran either are not exactly relevant or to complex for a person with my level of understanding.
