IAS2 LC finance cost

All topics related to IFRS Standards.
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Hesham255
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Joined: 16 Jun 2019, 10:17

IAS2 LC finance cost

Post by Hesham255 »

Dears,
Does finance cost related to Letter of credit that we issued from banks to suppliers to purchase the materials be capitalize on the inventory or be expensed in the P&L?

Thanks
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Marek Muc
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Re: IAS2 LC finance cost

Post by Marek Muc »

Hi,

as I understand, this is a kind of guarantee that a payment will be made?

it all boils down to the question of whether this expense is incurred in 'bringing the inventories to their present location and condition'

I would argue that no, this expense is not necessary to 'bring the inventories to their present location and condition',
but honestly I don't know what is the common practice. Probably these amounts are not material and both approaches are OK in real life :)

What is your opinion?
Hesham255
Posts: 26
Joined: 16 Jun 2019, 10:17

Re: IAS2 LC finance cost

Post by Hesham255 »

Hi,
Amounts are materials. those specific suppliers are not dealing with us unless they have valid LC. I guess (may be wrong) that this is cost that necessarily related to bringing the materials to its location.
do you think that it relates to IFRS9?
Reg.,
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Marek Muc
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Re: IAS2 LC finance cost

Post by Marek Muc »

This is purely under IAS 2. This is a judgemental area, I guess you can include these costs in purchase price if this is your judgement, it does not contradict provisions of IAS 2
Hesham255
Posts: 26
Joined: 16 Jun 2019, 10:17

Re: IAS2 LC finance cost

Post by Hesham255 »

Thanks for sharing your opinion.
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