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  • V1.27 PAS 23 - Borrowing Costs - NF

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    Czar Rabaya
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    This document discusses accounting standards for borrowing costs under PAS 23. It defines borrowing costs as interest and other costs incurred from borrowing funds. Borrowing costs must be capitalized if they are directly attributable to acquiring a qualifying asset, which takes substantial time to prepare for its intended use. Examples of qualifying assets include manufacturing plants and power generation facilities. Borrowing costs are expensed if they are not attributable to acquiring a qualifying asset. Assets may be financed through specific or general borrowings, and the document provides formulas for calculating capitalizable borrowing costs under each method.

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    V1.27 PAS 23_Borrowing Costs_NF

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    This document discusses accounting standards for borrowing costs under PAS 23. It defines borrowing costs as interest and other costs incurred from borrowing funds. Borrowing costs must be capitalized if they are directly attributable to acquiring a qualifying asset, which takes substantial time to prepare for its intended use. Examples of qualifying assets include manufacturing plants and power generation facilities. Borrowing costs are expensed if they are not attributable to acquiring a qualifying asset. Assets may be financed through specific or general borrowings, and the document provides formulas for calculating capitalizable borrowing costs under each method.

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    6 views1 page

    V1.27 PAS 23 - Borrowing Costs - NF

    Uploaded by

    Czar Rabaya
    This document discusses accounting standards for borrowing costs under PAS 23. It defines borrowing costs as interest and other costs incurred from borrowing funds. Borrowing costs must be capitalized if they are directly attributable to acquiring a qualifying asset, which takes substantial time to prepare for its intended use. Examples of qualifying assets include manufacturing plants and power generation facilities. Borrowing costs are expensed if they are not attributable to acquiring a qualifying asset. Assets may be financed through specific or general borrowings, and the document provides formulas for calculating capitalizable borrowing costs under each method.

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    © All Rights Reserved
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    of 1

    Intermediate Accounting Total Annual Borrowing Cost

    **Capitalization Rate =
    PAS 23: Borrowing Costs Total GeneralBorrowings
     Interest and Other costs that an entity incurs in connection
    with borrowing of funds Note: The excess between the Total GB Cost less the
     Specifically, it includes the following: Capitalizable borrowing cost is charged to Interest Expense.
    a.) Interest Expense
    b.) Finance Charge with respect to a Finance Lease
    c.) Exchange difference arising from foreign currency
    borrowing to the extent that it is regarded as an adjustment
    to interest cost.

    Borrowing Costs
    Capitalized Expensed
    -BC are capitalized if it is directly -BC are expensed if borrowing is
    attributable to A Qualifying Asset, Not directly attributable for
    which means that it necessarily acquisition of assets.
    takes a substantial period of time to Considered Not Qualifying Assets.
    get ready for the intended use or
    sale
    1. Manufacturing Plant 1. Assets measured @ FV
    2. Power Generation Facility 2. Inventory manufactured or
    3. Intangible Asset produced on repetitive basis
    4. Investment Property 3. Assets ready for their intended
    use (Machinery/Equipt) or Sale
    (Merch Inv/Stock in trade)

    Assets may be financed by:


    1.) Specific Borrowing
     Funds are borrowed specifically for the purpose of
    acquiring a Qualifying Asset.
     The amount of Capitalizable Borrowing Cost
    = is the Actual Borrowing Cost incurred less any
    Investment Income from the temporary investment of
    those borrowings.

    2.) General Borrowing


     Funds are borrowed generally and used for acquiring a
    Qualifying Asset.
     The Amount of Capitalizable Borrowing Cost
    = is the average carrying amount of the asset during the
    period multiplied by a Capitalization Rate or Average
    interest rate.

    3.) Both Specific and General Borrowing

    I. Specific Borrowing

    Actual Borrowing Cost


    Interest Expense (Prt) xx
    Less: Interest Income* (xx) xx

    II. General Borrowing

    Average Expenditures xx
    Less: Specific Borrowing - related (xx)
    General Borrowings – related xx
    Ave. Capitalization Rate** % xx

    Total Capitalizable Borrowing Cost xx


    Total Expenditures xx
    Cost of Asset xx

    *Only deduct Interest Income in Specific Borrowing

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