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specialized accounting treatments - maani - 11-29-2004

I didn't find enough material to understand the concept of "Capitalizaion of Borrowing Costs" and "Events after Balance Sheet Date"
so if one can help me and mention the reference books...


- Mr. Whappaaaa - 11-29-2004


firstly Borrowing cost are those costs whch are incured to finance the the acquisition of certain assets.(like interest cost or finance cost etc.)
UNDER BENCHMARK TREATMENT these cost are treated as expense in the income statement in that period they are incured.

UNDER ALLOWED ALTERNATIVE TREATMENT these cost should be capitalized as part of the assets as the assets is one which take some time to get ready for its intended use or sale.(generally are those assets which takes more than one yr foe example major plants, building,construction work)

suppose if assets value is 500,000 rupees. Organization borrow this amount by any financial institution which give 10% interest then 50,000 interest cost will be incurred.

UNDER BENCHMARK treat this 50,000 as an expense in the income statement in which period they are incurred.

UNDER ALLOWED ALTERNATIVE u may capitalize this cost as part of the assets we means to say that assets cost are now 550,000.

(but certain procedures are applied for the capitalization of borrowing cost like when we commence,suspend,cease the capitalization of borrowing cost)



- maani - 11-29-2004

thanks Asif,
but the problem is that which book should I use to solve the practical problems(numericals).


- Mr. Whappaaaa - 11-30-2004

heloww mani

yaar actualy the problem is that me doin ACCA. BPP and FOULK LYNCH practice revision kit is sufficient for me.. & i think u doin CA right ..??? so if u take some more advice about borrowing cost numericals then .. u should obtain some more advice to other members...