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Hi Prof, please assist here. If a company takes up a loan worth 30 million euros as per your example above at an annual interest of 8%. Why do we have to compute the respective interest using the weighted average expenditure of 12 million instead of just saying 8% of 30 million and get our interest for the year and capitalize it. What is the need for computing a weighted average expenditure? or why do we need it? Thank you Prof, looking forward to your educative response.
can you please expound further, does that mean by capitalizing the borrowing for a qualified asset, it would not be treated as a tax deduction ? thanks
If there's a loan with several drawdowns taken place during the year. Does this affect on how we calculate the capitalization rate? Shoud we just total up the CY interest incurred then divide it with total outstanding loan at the end of the period? or we should calculate for several capitalization rates (based on the drawdown dates) to be multiplied with the weighted average expenditures catagorized/differentiated based on payment date?
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If the problem states that the borrowing is for the purpose of constructing or acquiring the qualified asset, then it is specific, when it does not state a direct association to the asset it is general fund or borrowing.
Thanks for useful information, i have a question if you can support?, if a company import an equipment to use it for operation and paid a large amount of Letter of Credit charges, could we capitalize the Letter of Credit charges? Thank you in advance & sorry for the inconvenience
Yes, under IAS 16 it will be considered as direct cost. Kinda like appraiser's fee for purchasing a property. Because LC is a cost to secure purchase, it is necessary to capitalize the amount along with certain adjustments like foreign exchange gain or loss and etc.
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Thanks! You're really a great help especially that we're on lock down now. This is a great help for self learning!
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Perfectly explained!!
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great video
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Excellent lecture
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Really helpful 👍
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Hi Prof, please assist here.
If a company takes up a loan worth 30 million euros as per your example above at an annual interest of 8%. Why do we have to compute the respective interest using the weighted average expenditure of 12 million instead of just saying 8% of 30 million and get our interest for the year and capitalize it.
What is the need for computing a weighted average expenditure? or why do we need it?
Thank you Prof, looking forward to your educative response.
It's just crazy isn't it, this standard isn't complex so i guess they wanted to throw a little complexity in there so that it seems like a standard.
What if we had a loss from foreign currency exchange, do we add it to the capitalized cost?
can you please expound further, does that mean by capitalizing the borrowing for a qualified asset, it would not be treated as a tax deduction ? thanks
how about if there is year gap of loan in general borrowing how will it compute?
If there's a loan with several drawdowns taken place during the year. Does this affect on how we calculate the capitalization rate? Shoud we just total up the CY interest incurred then divide it with total outstanding loan at the end of the period? or we should calculate for several capitalization rates (based on the drawdown dates) to be multiplied with the weighted average expenditures catagorized/differentiated based on payment date?
*general loan
❤❤❤❤❤
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Thank youuu i learned a lot
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Galatoomi ❤❤❤
Hi sir😁i have question I confuse about specific borrowing and general borrowing..how can I determine that in the problem.?thank u sir😁
If the problem states that the borrowing is for the purpose of constructing or acquiring the qualified asset, then it is specific, when it does not state a direct association to the asset it is general fund or borrowing.
Thanks for useful information, i have a question if you can support?, if a company import an equipment to use it for operation and paid a large amount of Letter of Credit charges, could we capitalize the Letter of Credit charges?
Thank you in advance & sorry for the inconvenience
Yes, under IAS 16 it will be considered as direct cost. Kinda like appraiser's fee for purchasing a property. Because LC is a cost to secure purchase, it is necessary to capitalize the amount along with certain adjustments like foreign exchange gain or loss and etc.
Can you do something on IFRS 9?
will get there.
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