SRI LANKA ACCOUNTING STANDARDS LKAS 23 BORROWING COST

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Our Team Members 1. Hasitha 2. Siva 3. Sugirthan 4. Tharanga 5. Samith 6. Chathuranga 7. Samantha

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Content Ø Introduction Scope Definition Accounting Treatment Disclosure Ø Ø

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Introduction Ø Previous standard was SLAS 20. New standard came into effect from 01 -01 -2013 Ø This standard prescribe the accounting treatment for borrowing cost Ø Borrowing costs recognize as Directly attributable to asset • Expense in the period •

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Scope Ø Apply on borrowing cost Ø Does not deal with actual or imputed cost of equity. Ø Not required to apply on a qualifying asset measured at fair value e. g. biological asset Ø Inventories produced on large quantities on a repetitive basis

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Definition � Borrowing Ø Cost Borrowing cost are interest and other costs incurred by an enterprise in connection with the borrowing of funds.

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Borrowing Costs Include • Interest on bank overdraft and borrowings • Amortization of discounts or premiums on borrowings • Amortization of ancillary costs • Finance charges on finance leases • Exchange differences arises from foreign currency in borrowing

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Borrowing cost can classified as follows Borrowing Cost Related with Qualifying asset Related with other borrowing cost

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Qualifying Assets A Qualifying asset is a asset that necessarily take a substantial period of time to get ready for its intended use or sale. � Depending on the circumstances, any of the following may be qualifying assets: • Inventories • Manufacturing plants • Power generation facilities • Intangible assets • Investment properties

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Recognition • Capitalize Ø • Directly attributable to acquisition, construction or production of a qualifying asset as part of cost Expense Ø Recognize other borrowing cost as an expense in the period in which it incurs

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Borrowing cost eligible for capitalization Ø Capitalization rate Ø Commencement of capitalization Ø Suspension of capitalization Ø Cessation of capitalization Ø Partial Completion Ø Impairment

SRI LANKA ACCOUNTING STANDARDS – LKAS 23 BORROWING COST Disclosure Ø The amount capitalized during the period Ø The capitalization rate used to determine the borrowing cost

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