Hi Marek ,
First of all thanks in advance for your answer , We have a loan related to qualifying asset , interest on this loan is being capitalized according to IAS 23 , Now
the auditors want us to capitalize bank interest revenue as well. Is capitalizing bank interest revenue necessary and we should follow auditors advice or we should stick with capitalizing interest cost only ?
Capitalizing interest income
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- Posts: 7
- Joined: 17 Mar 2021, 14:08
Re: Capitalizing interest income
Pls refer below regarding measurement of borrowing cost relating to qualifying asset as per IAS 23 . Considering this auditors view is correct and interest income earned from investing the borrowed money need to be reduced from borrowing cost and net cost to be capitalised.
Where funds are borrowed specifically, costs eligible for capitalisation are the actual costs incurred less any income earned on the temporary investment of such borrowings. [IAS 23.12] Where funds are part of a general pool, the eligible amount is determined 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. [IAS 23.14]
Where funds are borrowed specifically, costs eligible for capitalisation are the actual costs incurred less any income earned on the temporary investment of such borrowings. [IAS 23.12] Where funds are part of a general pool, the eligible amount is determined 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. [IAS 23.14]
Re: Capitalizing interest income
Hi ssaad, as you can see, this is a community rather than a personal chat with just me