Borrowing Costs PAS 23

Question 1

What is Borrowing Costs?

Answer 1

PAS 23, par. 5, defines borrowing costs as, interest and other costs that an entity incurs in connection with borrowing of funds

Question 2

PAS 23
Borrowing Costs include:

Answer 2

1. Interest Expense calculated using effective interest method
2. Finance charge with respect to finance lease
3. Exchange difference arising from foreign currency borrowing to the extent that it os regarded as an adjustment to interest cost

Question 3

PAS 23
Qualifying Assets include:

Answer 3

1. Manufacturing plants
2. Power Generations Facilities
3. Intangible Assets
4. Investment Properties

They should be long term period to develop/produce

Question 4

PAS 23
Treatment of Interest Income or Investment Income to Specific or General Borrowing?

Answer 4

Specific Borrowing - Deduct from the capitalizable borrowing cost

General Borrowing - NOT DEDUCTED!

Question 5

PAS23
When shall capitalization of borrowing costs commence?

Answer 5

1. When the entity incurs expenditures for the asset
2. When the entity incurs borrowing cost
3. When the entity undertakes activities that are necessary to prepare the asset for the intended use or sale

Question 6

PAS 23
Explain the capitalizable interest from specific borrowing

Answer 6

Equal to ACTUAL BORROWING COSTS during the period less any investment income of those borrowings

Question 7

PAS23
Explain the Capitalizable interest from General Borrowing

Answer 7

Average Expenditures × Capitalization Rate

Average Expenditures - Parang sa partnership weighted ave lang, times mo lang kung ilang months over 12

Capitalizatiln Rate = Total Anual Borrowing Costs ÷ Total General Borrowings

NOTE:
*Capitalizable borrowing cost SHALL NOT exceed the actual interest incurred

*not deduct the interest income

Question 8

PAS23
Gen Borrowing Costs
Capitalization/Average Interedt Rate=?

Answer 8

Capitalization Rate = Total Anual Borrowing Costs (Interest Expense) ÷ Total General Borrowings

Question 9

PAS23
Medyo challenge lang dito is pag finance by both specific and general borrowing costs.

Explain the computation with only one difference

Answer 9

So yun, separate computatiom then combine mo lang yung capitalizable.

IMPT! The only difference ay idededuct sa Ave Expendetures yung Specific Borrowing amount.

Question 10

PAS23
Pano naman pag extended period of construction?

Answer 10

Dito, kasama sa pag average yung carrying amount of the asset (previous year expenditure plus capitalized borrowing cost). So times 12/12 sya. The same same.

Question 11

PAS23
Note lang. Pag Combined, specific and borrowing. Tapos yung expeditures ay inccurred evenly, devided by 2 mo para makua ang ave. expenditures.

Answer 11

Oks