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Finance Cost??
06-27-2007, 05:38 AM
Post: #1
Finance Cost??
Can anyone tell me as per which rule finance charges (incurred on the purchase of assets) are required to be separated from the other cost related to the same purchase and disclosed separately in financial statement.
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06-27-2007, 07:21 PM
Post: #2
 
Dear,

It is only required if some entity follows the allowed alternative treatment of IAS 23 {paragraph 10 and 11} and capitalise the borrowing cost as part of the cost of the realted qualifying asset.

This disclosure is required in Paragraph 29 (b) of IAS 23.

Regards,

Kamran.
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06-30-2007, 08:39 PM
Post: #3
 
Clarification required Kamran. Your post implies that if benchmark treatment-IAS 23 is followed finance charges are not required to be separated from the cost of asset. Did you intend to say this?
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07-02-2007, 05:03 PM
Post: #4
 
Dear,

I could not exactly understand ur query. Still, I wish to clarify the things pertaining to IAS 23.

As per IAS 23 there are two treatments of borrowings costs.

Benchmark treatment This requires to include all borrowing costs (incurred for whatever purposes) in the profit and loss acount.

Allowed alternative treatment This method allows to capitalise the directly attributable borrowing cost as a part of cost of a qualifying asset.

The seperate disclosure of what amount of borrowing cost has been caitlaized in the cost of a qualifying asset (along with capitalization rate used etc) will obviously required only if such cost has been capitalised by following the allowed alternative treatment.

If an entity follows benchmark treatment, it will never capitalize any borrowing cost and all borrowing costs, incurred for whatever purposes, will be charged to profit and loss account.

Therefore, in suc situation, no question arises for the disclosue of any borrowing cost capitalized as part of the asset.

If you have some other query regarding my above clarification, plz let me know.

Regards,

Kamran.
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