02-16-2010, 11:29 PM
Dear Kamran,
The point made here has not been grasped by at least one of us. WHAT IS THE TREATMENT? Its absolutely not the issue here, IFRSs are quite categoric about capitalizing and expensing of finance cost. However at the same time I hope you do understand that there is got to be a rationale behind any accounting treatment described by reporting standards. I hope I need not to clarify it through of examples here. Keeping this point in mind, to my reckoning the question asked here was to know the rationale behind capitalizing only the financing cost related to qualifying asset. For which I am afraid I didn't find any relevant explanation in any of your posts except the following lines in your last post.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />
the finance cost attributed to non-qualifying asset is periodic/operational cost and does not come under the ambit of a capitalization activity.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
This is again is more a conclusion instead of explaining the concept behind. I didn't find the basis of conclusion or dissenting opinions as regards this subject which I believe could have helped to understand the concept.
Coming back to another point
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Schuaeb</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 kamranACA</i>
<br />
The asset which is not a qualifying asset is supposed to be available for use at the date of acquisition (or soon after it), so its financing cost is associated with its operations and not with capitalization activity.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I believe that this statement is not true for finance leases. The financing cost in case of finance lease to my understanding is not associated with the operations of the asset instead it is associated with the acquisition of asset
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
There is no discussion what so ever as regards the treatment of finance cost for non-qualifying assets as per the provisions of IAS 17 & 23, these are very well known. I don't know why you so often base your discussion with an assumptions that the person you are talking to is absolutely ignorant. Referring to the latest quote please be considerate to explain that how financing cost in case of FINANCE LEASE is a cost related to the operations of the asset. Obviously the accounting treatment suggests so, but that is not the point in discussion here.
Digressing from the main point and beating about the bush I don't think suite a PROFESSIONAL. Still I didn't find any relevance of most part of your post with the subject of thread. I suggest you need to get through the entire thread once again with a calm mind.
The point made here has not been grasped by at least one of us. WHAT IS THE TREATMENT? Its absolutely not the issue here, IFRSs are quite categoric about capitalizing and expensing of finance cost. However at the same time I hope you do understand that there is got to be a rationale behind any accounting treatment described by reporting standards. I hope I need not to clarify it through of examples here. Keeping this point in mind, to my reckoning the question asked here was to know the rationale behind capitalizing only the financing cost related to qualifying asset. For which I am afraid I didn't find any relevant explanation in any of your posts except the following lines in your last post.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />
the finance cost attributed to non-qualifying asset is periodic/operational cost and does not come under the ambit of a capitalization activity.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
This is again is more a conclusion instead of explaining the concept behind. I didn't find the basis of conclusion or dissenting opinions as regards this subject which I believe could have helped to understand the concept.
Coming back to another point
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Schuaeb</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 kamranACA</i>
<br />
The asset which is not a qualifying asset is supposed to be available for use at the date of acquisition (or soon after it), so its financing cost is associated with its operations and not with capitalization activity.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I believe that this statement is not true for finance leases. The financing cost in case of finance lease to my understanding is not associated with the operations of the asset instead it is associated with the acquisition of asset
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
There is no discussion what so ever as regards the treatment of finance cost for non-qualifying assets as per the provisions of IAS 17 & 23, these are very well known. I don't know why you so often base your discussion with an assumptions that the person you are talking to is absolutely ignorant. Referring to the latest quote please be considerate to explain that how financing cost in case of FINANCE LEASE is a cost related to the operations of the asset. Obviously the accounting treatment suggests so, but that is not the point in discussion here.
Digressing from the main point and beating about the bush I don't think suite a PROFESSIONAL. Still I didn't find any relevance of most part of your post with the subject of thread. I suggest you need to get through the entire thread once again with a calm mind.