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Why is the cost of equity excluded from Boring Costs?
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Cost of equity is excluded because it pertains to the actual and imputed costs or dividends paid to equity shareholders, which aren't liabilities.
What are the components included under Boring Costs according to IAS 23?
Interest and other costs incurred in connection with the borrowing of funds.
Describe general borrowing and how it is applied under IAS 23.
General borrowing refers to borrowed funds used for various purposes. The cost of these borrowings that can be attributed to a Qualifying Asset is calculated using a weighted average capitalization rate.
What type of assets are excluded from being considered Qualifying Assets?
Financial assets like cash and investments, short-term inventories produced on a repetitive basis, ready for use assets like air conditioners, and assets measured at fair value.
Explain how to calculate borrowing cost for specific borrowings.
Calculate the actual borrowing cost and subtract any temporary investment income from the specific borrowed funds.
Define substantial period of time in the context of a Qualifying Asset.
A substantial period of time is not explicitly defined but is typically interpreted as three months or more, based on judgment.
How are borrowing costs treated under the core recognition principle?
Directly attributable Boring Costs are included in the cost of a Qualifying Asset, while other costs are expensed.
How does IAS 23 intersect with IS36 regarding impairment loss?
If the carrying amount of an asset exceeds the recoverable amount, an impairment loss is recognized in accordance with IS36.
What is the treatment of write-downs under IS2 in the context of borrowing costs?
Write-downs to Net Realizable Value are recognized according to IS2, ensuring assets are not overvalued in financial reports.
Define a 'Qualifying Asset' under IAS 23.
A Qualifying Asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
List some examples of Qualifying Assets.
Examples include inventory that takes a long period to produce, power generation facilities, intangible assets under development, and certain bearer plants.
What is the importance of the prudence concept in the context of borrowing costs?
The prudence concept ensures that the carrying amount of an asset does not exceed its recoverable amount, leading to the recognition of impairment losses if necessary.
How are interest expenses under lease liabilities classified in Boring Costs?
Interest expenses under lease liabilities are included as Boring Costs.
Describe how to determine the capitalization rate for general borrowings.
The capitalization rate is determined by calculating the weighted average of the borrowing rates of all loans.
What is a specific borrowing in the context of IAS 23?
Specific borrowing refers to funds borrowed specifically for the financing of a Qualifying Asset.
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