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
IAS2 LC finance cost
Re: IAS2 LC finance cost
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?
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?
Re: IAS2 LC finance cost
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.,
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.,
Re: IAS2 LC finance cost
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
Re: IAS2 LC finance cost
Thanks for sharing your opinion.