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IAS 23 and Leases
02-18-2010, 07:38 AM,
Kamran sb, the point made by you that the provisions for cessation of capitalization have been made by keeping in mind that capitalization should not be allowed to an extent that it may invite immediate impairment sounds logical. Alongwith other reasons, one reason for which finance cost in case of finance lease is not allowed to be capitalized is the carrying amount of the asset may immediately be needed to written down to it recoverable amount i.e. higher of value in use and value in sale.

I avoid to go into the details of what has been referred to here as beating about the bush. I would only say that the differences between your initial and latest posts are very much apparent to the readers. Unless you link the rationale/arguments provided with the desired results ordinary readers like me may not be able to understand. I'll repeat that your initial replies at this thread shows a lack of precise understanding of the point in discussion at your end. However, at the same time, I like your explanation a lot when some consensus on the problem has been developed. Also I shouldn't have said anything about your impatience especially when for obvious reason you won't like yourself being discussed. Writing long post substantiates your argument of you being patient.

I don't think that long posts may be perceived negatively. And at the same time I am clueless that someone may interpret that a particular query is raised only with intention to expose someone's confusion!
02-18-2010, 01:52 PM,
The previous posts of kamran bhai were in line with the later posts. It is just a matter of how you take it
Thanks kamran bhai, even my question has been answered
02-18-2010, 07:49 PM,

It's certainly a matter that how you understand or percieve a thing.

We are seeing 3 varying comments in response to same post of mine (the last one). So, in everymatter understanding plays a role. your conclusion is self-proved.

Let me explain another thing which remained missing. Although, finance lease assets are to be stated at lower of fair value and PV of MLP, which as a result may not strictly be the "fair value" in each case; and which can be used to conclude a bit relaxation in case a qualifying asset is acquired, However, it is imperative to mention (and which has missed in earlier write up) that IAS-23's concept of absorbing borrowing costs has nothing to do with those assets that are stated (strictly) on "FAIR VALUES".

The asset that is stated at Fair Value cannot be deemed as qualifying assets under IAS-23 even if they take time to get ready for intended use or sale.

Reason is clear that, they are already at fair value which cannot be increased by adding up borrowing costs.


02-20-2010, 04:28 AM,
Dear Mr. Kamran

May you be able to interprete and explain 'SAHI BUKHARI SHAREEF'!

One must go the doctor for medicine, Molvi for Nikah, Chartered Accountant for Audit and an Aalim for SAHI BUKHARI SHAREEF and I feel i know this.

I cannot confuse anyone neither my intention is this. OK you are lord of the Reporting Bibles, if my any word, although cannot, affects your high profile and pride, i beg pardon. I hope you are generous enough to forgive

Dear Mr. Shoib

I interprete as follows

When the borrowing cost is incurred on qualifying assets, it is capialized because it is directly attributable cost and the economic benefits agianst those costs are received in future periods.

In case of finance lease, finance cost is not capitalized because
it is not allowed by the standards. I tried to know why but I dont think I can understand. The thing confused me was, it is mentioned in Scope of IAS 23 that it applies to finance cost under finance leases, How does it applies their



02-20-2010, 06:29 AM,
The question has already been answered wsafca
Only qualifying asset's finance cost will be capitalised. If the leased asset does not fulfill the criteria of qualifying asset then the finance cost of finance leased asset will not be capitalised
02-20-2010, 10:16 AM,
Ahmed I do have an idea that what you intended to ask on this thread and your last post confirms it further. I appreciated your query and also liked to know the reason. The explanation provided by Mr. Kamran for not capitalizing finance charges in case of finance lease due to impairment implications partially gives the answer.

The first part of your post is quite disturbing. Mr. Kamran has quite a good understanding of IFRSs, though he may not be always right. More courtesy is expected from someone like you during communication.
02-21-2010, 11:50 AM,

Thanks God you at least know where to go for the resolution of a specific problem. Otherwise, what could had gone wrong if you would have declared "this also confuses me".

Without going in detail and with an intent of pardoning (as you have begged) I wish to let you know that you should try to understand the things.

I know some people take too much time to understand and some don't understand at all.

I have further expressed my view on another thread that the one's who don't understand at all are the better of two.



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