IFRS List.com: Borrowing Cost

Home » IAS 23

Borrowing Cost

21 November 2009 350 views 2 Comments

Hello I Have A question

if i have more than a qualify asset at the same time (say 4) and i only have one loan

how i captilize the interest for each asset (give Examples )as they are all at the same time and they are all different??

2 Comments »

ifrsexpert said:

You don’t capitalise the interest on the loan. You capitalise the interest on the amount you spent on constructing the asset. In the words of the standard, you capitalise the “avoidable interest”, that is, the interest you would have avoided paying if you hadn’t needed the money to construct an asset. So it doesn’t matter how many assets you have being financed by the same loan.

# 21 November 2009 at 7:50 pm

Radhika1308 said:

Yes, interest paid on general loan that finances more than one qualifying asset can be capitalised as per IAS 23. Hence, I agree with the previous response from ifrsexpert. To give you an example…

Company A has taken a 10% 10 year note with simple interest payable annually. The amount outstanding on July 01, 2008 is US$1,000,000 and no changes to the outstanding loan during the fiscal year 2009.

The following are the cash flows of the qualifying assets A and B constructed by the company during the fiscal year ended June 2009:

Averaged for the period
Outstanding
Asset A
July 01, 08 US$300,000 300,000*12/12
Dec 31,08 US$200,000 200,000*6/12

Total for Asset A 400,000

Asset B
Sept 30,08 US$100,000 100,000*9/12
Jan 31, 09 US$300,000 300,000*5/12

Total for Asset B 200,000

The interest payment of 10% will be capitalised as follows:

Asset A 10% of US$400,000 = US$40,000
Asset B 10% of US$200,000 = US$20,000

Trusts this clarifies.

# 27 November 2009 at 10:07 am