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?
quoted from the standardAn entity shall suspend capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.however delay does not mean suspend.Current rule – interest accruing on ongoing projects shall be expensed off.i don’t really understand this. i thought the borrowing cost should be capiltised?