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类型ACCA国际会计准则IAS23borrowingcost-e.doc

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    ACCA国际会计准则IAS23borrowingcost-e.doc
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    1、中国领先 ACCA 培训中心,官方认可黄金级机构http:/Acca. Gaodun.Cn高顿 ACCA 研究中心:中国 上海 虹口区中山北一路 369 号课程咨询 :上海虹口 021-6199 9158 上海徐汇 021-6167 9188 远程课程:021-6052 0476Borrowing Cost - Relevant to paper F7 Objective of IAS 23The objective of IAS 23 is to prescribe the accounting treatment for borrowing costs. Borrowing costs i

    2、nclude interest on bank overdrafts and borrowings, amortisation of discounts or premiums on borrowings, finance charges on finance leases and exchange differences on foreign currency borrowings where they are regarded as an adjustment to interest costs.Borrowing cost may include: interest expense ca

    3、lculated by the effective interest method under IAS 39, finance charges in respect of finance leases recognised in accordance with IAS 17 Leases, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costsThis standard doe

    4、s not deal with the actual or imputed cost of equity, including any preferred capital not classified as a liability pursuant to IAS32.A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use or sale. That could be property, plant, and equipment and inv

    5、estment property during the construction period, intangible assets during the development period, or “made-to-order“ inventories. Scope of IAS 23 Two types of assets that would otherwise be qualifying assets are excluded from the scope of IAS 23: qualifying assets measured at fair value, such as bio

    6、logical assets accounted for under IAS 41 Agriculture inventories that are manufactured, or otherwise produced, in large quantities on a repetitive basis and that take a substantial period to get ready for sale (for example, maturing whisky)Accounting treatmentRecognitionBorrowing costs that are dir

    7、ectly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset and, therefore, should be capitalised. Other borrowing costs are recognised as an expense. 中国领先 ACCA 培训中心,官方认可黄金级机构http:/Acca. Gaodun.Cn高顿 ACCA 研究中心:中国 上海 虹口区中山北一路 369 号课程咨询 :上

    8、海虹口 021-6199 9158 上海徐汇 021-6167 9188 远程课程:021-6052 0476The foregoing reflects revisions to IAS 23 adopted by the IASB in March 2007 that prohibit immediate expensing of borrowing costs. Those revisions are effective for borrowing costs relating to qualifying assets for which the commencement date fo

    9、r capitalisation is on or after 1 January 2009. Earlier application is permitted.Until that revision was effective, an entity could apply the previous version of IAS 23, which permitted, as an accounting policy option, the immediate expensing model. Under that model, all borrowing costs should be ex

    10、pensed in the period in which they are incurred.MeasurementWhere funds are borrowed specifically, costs eligible for capitalisation are the actual costs incurred less any income earned on the temporary investment of such borrowings. Where funds are part of a general pool, the eligible amount is dete

    11、rmined by applying a capitalisation rate to the expenditure on that asset. The capitalisation rate will be the weighted average of the borrowing costs applicable to the general pool. Capitalisation should commence when expenditures are being incurred, borrowing costs are being incurred and activitie

    12、s that are necessary to prepare the asset for its intended use or sale are in progress (may include some activities prior to commencement of physical production). Commencement of CapitalisationThe capitalisation of borrowing costs as part of the cost of a qualifying asset should commence when: (a) e

    13、xpenditures for the asset are being incurred; (b) borrowing costs are being incurred; and (c) activities that are necessary to prepare the asset for its intended use or sale are in progress. Expenditures on a qualifying asset include only those expenditures that have resulted in payments of cash, tr

    14、ansfers of other assets or the assumption of interest-bearing liabilities. Expenditures are reduced by any progress payments received and grants received in connection with the asset (see IAS 20, Accounting for Government Grants and Disclosure of Government Assistance). The average carrying amount o

    15、f the asset during a period, including borrowing costs previously capitalised, is normally a reasonable approximation of the expenditures to which the capitalisation rate is applied in that period. The activities necessary to prepare the asset for its intended use or sale encompass more than the phy

    16、sical construction of the asset. They include technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits 中国领先 ACCA 培训中心,官方认可黄金级机构http:/Acca. Gaodun.Cn高顿 ACCA 研究中心:中国 上海 虹口区中山北一路 369 号课程咨询 :上海虹口 021-6199 9158 上海徐汇 021

    17、-6167 9188 远程课程:021-6052 0476prior to the commencement of the physical construction. However, such activities exclude the holding of an asset when no production or development that changes the assets condition is taking place. For example, borrowing costs incurred while land is under development are

    18、 capitalised during the period in which activities related tothe development are being undertaken. However, borrowing costs incurred while land acquired for building purposes is held without any associated development activity do not qualify for capitalisation.Suspension of CapitalisationCapitalisat

    19、ion of borrowing costs should be suspended during extended periods in which active development is interrupted. Borrowing costs may be incurred during an extended period in which the activities necessary to prepare an asset for its intended use or sale are interrupted. Such costs are costs of holding

    20、 partially completed assets and do not qualify for capitalisation. However, capitalisation of borrowing costs is not normally suspended during a period when substantial technical and administrative work is being carried out. Capitalisation of borrowing costs is also not suspended when a temporary de

    21、lay is a necessary part of the process of getting an asset ready for its intended use or sale. For example, capitalisation continues during the extended period needed for inventories to mature or the extended period during which high water levels delay construction of a bridge, if such high water le

    22、vels are common during the construction period in the geographic region involved. Cessation of CapitalisationCapitalisation of borrowing costs should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. An asset is normally

    23、ready for its intended use or sale when the physical construction of the asset is complete even though routine administrative work might still continue. If minor modifications, such as the decoration of a property to the purchasers or users specification, are all that are outstanding, this indicates

    24、 that substantially all the activities are complete. When the construction of a qualifying asset is completed in parts and each part is capable of being used while construction continues on other parts, capitalisation of borrowing costs should cease when substantially all the activities necessary to

    25、 prepare that part for its intended use or sale are completed. A business park comprising several buildings, each of which can be used individually is an example of a qualifying asset for which each part is capable of being usable while construction continues on other parts. An example of a qualifyi

    26、ng asset that needs to be complete before any part can be used is an industrial plant involving several processesDisclosure IAS 23.26中国领先 ACCA 培训中心,官方认可黄金级机构http:/Acca. Gaodun.Cn高顿 ACCA 研究中心:中国 上海 虹口区中山北一路 369 号课程咨询 :上海虹口 021-6199 9158 上海徐汇 021-6167 9188 远程课程:021-6052 0476 the accounting policy adop

    27、ted required only until 1 January 2009 if immediate expensing model was used amount of borrowing cost capitalised during the periodcapitalisation rate used.The above topic was examed in June 2010, Q5 , let us have a look of part(b) of this question.Question: Details relating to construction of Apexs

    28、 new store:Apex issued a $10 million unsecured loan with a coupon (nominal) interest rate of 6% on 1 April 2009. The loan is redeemable at a premium which means the loan has an effective finance cost of 75% per annum. The loan was specifically issued to finance the building of the new store which me

    29、ets the definition of a qualifying asset in IAS 23. Construction of the store commenced on 1 May 2009 and it was completed and ready for use on 28 February 2010, but did not open for trading until 1 April 2010. During the year trading at Apexs other stores was below expectations so Apex suspended th

    30、e construction of the new store for a two-month period during July and August 2009. The proceeds of the loan were temporarily invested for the month of April 2009 and earned interest of $40,000.Required: Calculate the net borrowing cost that should be capitalised as part of the cost of the new store

    31、 and the financecost that should be reported in the income statement for the year ended 31 March 2010. (5 marks)Answer:The finance cost of the loan must be calculated using the effective rate of 75%, so the total finance cost for the year ended 31 March 2010 is $750,000 ($10 million x 75%). As the l

    32、oan relates to a qualifying asset, the finance cost (or part of it in this case) can be capitalised under IAS 23.The Standard says that capitalisation commences from when expenditure is being incurred (1 May 2009) and must cease when the asset is ready for its intended use (28 February 2010); in thi

    33、s case a 10-month period. However, interest cannot be capitalised during a period where development activity is suspended; in this case the two months of July and August 2009. Thus only eight months of the years finance cost can be capitalised = $500,000 ($750,000 x 8/12). The remaining four-months

    34、finance costs of $250,000 must be expensed. IAS 23 also says that interest earned from the temporary investment of specific loans should be deducted from the amount of finance costs that can be capitalised. However, in this case, the interest was earned during a period in which the finance costs wer

    35、e NOT being capitalised, thus the interest received of $40,000 would be credited to the income statement and not to the capitalised finance costs.In summary:中国领先 ACCA 培训中心,官方认可黄金级机构http:/Acca. Gaodun.Cn高顿 ACCA 研究中心:中国 上海 虹口区中山北一路 369 号课程咨询 :上海虹口 021-6199 9158 上海徐汇 021-6167 9188 远程课程:021-6052 0476Income statement for the year ended 31 March 2010:Finance cost (debit) $(250,000)Investment income (credit) $40,000Statement of financial position as at 31 March 2010:Property, plant and equipment (finance cost element only) $500,000Prepared by Golden ACCA R&D Center December, 2012

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