02-18-2010, 02:51 AM
Dears
First of all, i would like to express my in-ability to properly read
posts of Mr. kamran (with all due respect to him), may be those were more long.
As you also mentioned
"On one hand IAS-23 states that the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are those borrowing costs that WOULD HAVE BEEN AVOIDDED if the EXPENDITURE on qualifying asset HAD NOT BEEN MADE;"
My question was simply this, "As the the finance charge on finance leases can be avoided if the expenditure (Prinicipal amount of the Finance lease)on Finance lease had not been made,therefore it is (Finance charge) directly attributable cost. Why the directly attributable cost to qualifying asset is allowed to be capitalized and why the directly attributable cost to non-qualifying asset is not allowed by the standards to be capitalized.
I know what are the qualifying assets - I even mentioned in my first post.
I know it is not allowed by the standards.
Please donot take anything personal and have at least a little patience for the criticism...If you would have only written, please read IAS16, IAS 23, IAS 17, IAS 1 and other related material, that would be the shorter answer.
Regards
Ahmed
On the other hand this standard also puts cap on capitalizing such costs to a certain extent i.e. until such asset is not completed. In more clear words standard says;
âA qualifying asset is an asset that necessarily takes a substantial period of time to get READY for its INTENDED USE or SALE.â
The words âintended useâ and âsaleâ are vital to understand the issue. Once an asset is available for âintended useâ presumably its operations start. Like-wise when an asset is available for âSALEâ it is again a finished product and ready for use.
First of all, i would like to express my in-ability to properly read
posts of Mr. kamran (with all due respect to him), may be those were more long.
As you also mentioned
"On one hand IAS-23 states that the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are those borrowing costs that WOULD HAVE BEEN AVOIDDED if the EXPENDITURE on qualifying asset HAD NOT BEEN MADE;"
My question was simply this, "As the the finance charge on finance leases can be avoided if the expenditure (Prinicipal amount of the Finance lease)on Finance lease had not been made,therefore it is (Finance charge) directly attributable cost. Why the directly attributable cost to qualifying asset is allowed to be capitalized and why the directly attributable cost to non-qualifying asset is not allowed by the standards to be capitalized.
I know what are the qualifying assets - I even mentioned in my first post.
I know it is not allowed by the standards.
Please donot take anything personal and have at least a little patience for the criticism...If you would have only written, please read IAS16, IAS 23, IAS 17, IAS 1 and other related material, that would be the shorter answer.
Regards
Ahmed
On the other hand this standard also puts cap on capitalizing such costs to a certain extent i.e. until such asset is not completed. In more clear words standard says;
âA qualifying asset is an asset that necessarily takes a substantial period of time to get READY for its INTENDED USE or SALE.â
The words âintended useâ and âsaleâ are vital to understand the issue. Once an asset is available for âintended useâ presumably its operations start. Like-wise when an asset is available for âSALEâ it is again a finished product and ready for use.
