IAS - 16: Capitalization of interest charges

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Asalam o Aaikum

I am a student of PIPFA Final and from yours kind support i want to know the following.

at the time of capitalization of plant can we included the cost of any interest charges paid to supplier for deferred credit?

what is the alternative treatment of above mentioned question in IAS - 23?

Thanks

Muhammad Umar - PIPFA(F)

[[email protected]]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by [email protected]</i>
<br />Asalam o Aaikum

Iam a student of PIPFA Final and from yours kind support i want to know the following.

at the time of capitalization of plant can we included the cost of any intrest charges paid to supplier for deferred credit??

what is the alternative treatment of above mentioned quesion in IAS - 23???

Thanks

Muhammad Umar - PIPFA(F)

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">



Is every buddy here to answer me with a solid reason???

please writes your comments at your earliest..

Regards!

Umar.

[Nobin]

Dear Asalam o Aaikum

As per IAS 16 PPE, interest charges are not capitalised for assets. Instead they are charged to P/L under finance charges. All expenses incurred to bring the assets for its intended used are capitalised e.g transport cost, VAT (which is not transferable).

IAS 23 deals with borrowing cost for qualifying assets. Qualifying assets are assets that takes a long period for completion. Hence during these period part of the interest is allowable for capitalisation.

In your case if the asset refered is a qualifying assets then under IAS 23 you can capitalised the interest charged till completion of the assets. In the other case , same is expensed to P/L under Finance charges.

Hope this answer your question.

[[email protected]]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by [email protected]</i>
<br /><blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by [email protected]</i>
<br />Asalam o Aaikum

Iam a student of PIPFA Final and from yours kind support i want to know the following.

at the time of capitalization of plant can we included the cost of any intrest charges paid to supplier for deferred credit??

what is the alternative treatment of above mentioned quesion in IAS - 23???

Thanks

Muhammad Umar - PIPFA(F)

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">



Is every buddy here to answer me with a solid reason???

please writes your comments at your earliest..

Regards!

Umar.


<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

walekum salam,

Dear Nobin,

you mean to say that intrest charges paid to supplier due to late payment can be capitalized at the time of acquisition of an asset. but dear, kindly clarify that what are you saying about completion of an asset, em not getting ur point??

further, please also provide support about increamental depreciation.
how it is caculate and what is the impect of this on revalued amount of an asset..


regards


Umar

[Nobin]

Dear Umar

From your post below, I did not say that you can capitalised he borrowing cost. The asset you are referring to does not categorised as financial asset, I guess. Qualifying asset does not have the same meaning as an asset. As per IAS 23, Qualifying assets , are assets that takes substancial period of time to get ready for its intended use or sale i.e, a acquisition of a mild plant. In case where an asset does not meet the definition of a qualifying asset , IAS 23 does not permit capitalisation of the borrowing cost. Let me know what asset you are referring to , I will tell you if the asset is a qualifying asset.

Your second question is referred to

When an asset is revalued , the depreciation is also revised based on the new life span of the asset . And new depreciation is charged based on the revalued amount.

[MuhammadMohsinHussainKhan]

i want to add one more thing in Nobin`s Comments is that if the revaluation takes Place during the year then the difference B/W cost Base Depriciation & Revaluation base Depriciation will be trnasfer to retain earnings , which has to be shown in statement of Retain Earnings