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Cfas Pas 23

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Sheinna Mae Von Calupig
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50 views1 page

Cfas Pas 23

Uploaded by

Sheinna Mae Von Calupig
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BORROWING COSTS TAKE NOTE: NOT A QUALIFYING ASSET

Under PAS 23, Borrowing Cost (interest or finance cost) is A. Financial assets
defined as interest and other costs that an entity incurs in B. Inventories that are manufactured or otherwise
connection with borrowing of funds. produced, over a short period of time, are not
qualifying assets.
In other words, as the term suggests, borrowing costs are C. Assets that are ready for their intended use or sale
interest costs incurred as a result of borrowings from banks and when acquired
other financial institutions. D. Assets measured at Fair Value

TAKE NOTE: EXAMPLE OF BORROWING COST CAPITALIZATION OF BORROWING COSTS


A. Interest expense on financial liabilities or lease Borrowing costs are capitalized if they are avoidable, meaning
liabilities computed using the effective interest they would not have been incurred if the expenditure on the
method; and qualifying asset had not been made.
B. Exchange differences on foreign borrowings that are
regarded as an adjustment to interest costs.
STARTS When all of the following conditions are
met:
CLASSIFICATION AND MEASUREMENT
Specific borrowing Refers to funds borrowed intended A. Expenditures for the asset are being
specifically in acquiring a incurred;
qualifying asset. B. Borrowing costs are being
incurred; and
C. Activities necessary to prepare the
Capitalizable borrowing cost on specific borrowing are computed:
asset for its intended use or sale are
being undertaken.
CAPITALIZABLE BORROWING COST
= Actual borrowing costs - Investment Income
SUSPENDED During extended periods in which active
development is interrupted. Borrowing costs
General borrowing Obtained for more than one
during these periods are expensed.
purpose, intended partly in
acquiring a qualifying asset and
partly for general or working NOT If substantial technical and administrative
capital purposes. SUSPENDED work is being performed or a temporary delay
is a necessary part of the development process.
Capitalizable borrowing costs on general borrowings are computed:
EX: Capitalization of borrowing costs is not
suspended when construction is temporarily
CAPITALIZABLE BORROWING COST
stopped due to a typhoon.
= Ave. Expenditure x Capitalization Rate

CAPITALIZATION RATE CEASES When the qualifying asset is substantially


= total interest expense on gen. borrowings complete.
/ total gen borrowing
If the construction of a qualifying asset is
The borrowing cost to be capitalized is the lower of the amount completed in parts, capitalization ceases for
computed using the formula and the actual borrowing costs. each part that is completed and ready for its
intended use. Capitalization continues for the
uncompleted parts.
NOTE: Borrowing costs do not include actual or imputed cost of
equity or capital

TAKE NOTE: DISCLOSURE


CORE PRINCIPLE UNDER PAS 23
A. The amount of borrowing costs capitalized during the
Borrowing Costs that are directly attributable to the acquisition,
period.
construction or production of a qualifying asset are capitalized
B. The capitalization rate used to determine the
as cost of that asset. Other borrowing costs are expensed when
capitalizable borrowing costs
incurred.

QUALIFYING ASSETS
An asset that necessarily takes a substantial period of time to
get ready for its intended use or sale.

TAKE NOTE: EXAMPLE OF QUALIFYING ASSET


A. Inventories that táke a long period of time to produce
B. Items of PPE (eg, building) that take a long period of
time to construct or to get ready for their intended use
C. Intangible assets that take a long period of time to
develop
D. Bearer Plants
E. Manufacturing plants
F. Power generation facilities
G. Investment properties

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