Current rule – interest accruing on ongoing projects shall be expensed off
New rule – such interest can be capitalised
- balance sheets could be carrying assets with bloated values initially and subsequently requiring more effort in reviewing them for impairment
- difference in capital/financing structure would have a direct implication on the carrying value of the asset
Delays in completion of projects under current economic environment ==> would mean that more of the interest “expense” would be capitalised onto the balance sheets instead being expensed off in the P&L.
Mr Kon Yin Tong, Partner of Foo Kon Tan Grant Thornton said he is not comfortable with the new rule. As for me, I would need to find out the basis behind Accounting Standards Council’s (ASC) reasons for the change in the first place. Can someone share on this?