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Criteria for the comparison of the borrowing costs

Author: ShiChunRan From: www.yourpaper.net Posted: 2007-11-20 12:10:03 Read:
Every enterprise is inevitable that the duration of its occurrence such as the borrower, interest and other costs incurred on borrowings accounted for it naturally became an important element in business accounting. There are two methods of accounting: borrowing costs expensed and capitalized, the selection of different accounting methods may cause changes in the current accounting profits. Therefore, in practical work, when borrowing costs. The extent to which the capitalization has been a sensitive issue. Long time, due to the recognition criteria for capitalization of borrowing costs is not clear to some of the listed companies opportunistic inflated profits to take advantage of the machine, and also bring a lot of distress to the Accounting & Auditing. To this end, China's Ministry of Finance in early 2001, the promulgation and implementation of specific accounting standards "Enterprise Accounting Standards - Borrowing Costs", a clear specification of the borrowing costs of the accounting, both listed companies and the capitalization of borrowing costs inflated profits behavior plays a certain constraint role, but also provides a solid basis for the actual work of accountants.

This article intends to borrowing costs criteria (hereinafter referred to as "China's specific guidelines) with the International Accounting Standards Committee (IASC) has formulated and promulgated the corresponding specific Accounting Standards No. 23 (hereinafter referred to as" IAS 23 ") to make a comparison, I believe not only help us accurate understanding of our specific criteria, and a better grasp of the growing international economic exchanges, the use of the guidelines accounting language at the same time there are some positive significance.

Borrowing costs, range

Borrowing costs generally refers to the interest of the borrowed funds and other charges. But its specific scope of specific guidelines that do not apply to "finance charges in respect of finance leases and borrowing costs incurred in the real estate product development process, and IAS 23 clearly does not involve equity (including non-classified the actual cost of the liabilities of the preference shares) or hypothetical cost borrowing costs, including finance lease finance lease fee, also borrowed funds caused interest for investment real estate. Visible, IAS 23 is based on debt or equity divided borrowing costs, and pointed out that the guidelines apply only to the borrowing costs of all liabilities. Specific guidelines and our causes and purposes of the school borrowers to determine its scope, and the scope of application is relatively small.

Second, the accounting treatment of borrowing costs

(-) The choice of accounting treatment Buffa use

IAS 23 and of specific guidelines on the accounting treatment of borrowing costs provides two methods: recognized in the period in costs or conditions in accordance with the provisions of capitalization. The difference is that IAS 23 will be recognized as incurred that cost as a benchmark approach capitalized as the method allows the use of ". And regulations, regardless of the borrowers how to use the borrowing costs should be recognized as an expense over the period in capitalization, except in accordance with the regulations. The reason for this arrangement is that the theory, the principle of "revenue and expense ratio", borrowing costs in some cases should be capitalized, but in practice, consider the cost method easier operation, and consistent with sound principle. In practice, some countries despite provisions to allow the capitalization of borrowing costs, companies often choose the treatment method of borrowing costs.

China's specific guidelines explicitly requested, except for the acquisition of fixed assets and borrowing costs must be capitalized Outsider, the other purpose of the borrowing costs should be expensed and credited to the profit or loss. Such a requirement is based on the consideration of the income and expense ratio "principle. Meanwhile, most of the funds for the acquisition or construction of fixed assets in China's enterprises still comes from borrowing, the amount of borrowing costs that occur as a result, the request All borrowing costs are recognized as an expense, many companies will be unbearable.

In addition, specific guidelines on the ancillary costs incurred in arranging borrowings made special provisions: auxiliary expenses belong to the acquisition or construction of fixed assets to achieve the intended use should be capitalized as incurred; occurred after the auxiliary costs should be recognized as an expense in the current period. But if the former occurrence of relatively small amounts, can also be recognized in the current period as an expense. So here pointed out that the exception occurred time and amount is actually flexible auxiliary expenses. Such provisions, mainly fully consider the actual situation of our various borrowing for flexible arrangements. Because in our country, to obtain bank borrowings sometimes need companies to do a lot of public relations work, and sometimes the enterprise was able to easily obtain bank loans, often very different in different enterprises in order to obtain a borrower Ancillary costs incurred. In comparison, IAS 23 would be no special provisions for auxiliary expenses.

(B) the method used by the borrower are capitalized

1. Conditions and scope of the capital.

Capitalized conditions specific guidelines provides that interest on specific borrowings, amortization of discounts or premiums and other borrowing costs must also meet the following three conditions: (1) expenditures for the asset have occurred; (2) the borrower The costs are being incurred; (3) the asset for its intended use, the state required for the acquisition or construction has begun. Where specific borrowings the sums borrowed specifically for the acquisition of fixed assets; assets the spending only include the acquisition or construction of fixed assets in order to pay cash, the transfer of non-cash assets or bear the expenditure incurred in the form of interest-bearing debt. For example, with the monetary funds to buy building materials enterprises produce their own products for the construction of fixed assets, as well as the purchase of engineering materials with interest-bearing notes the case. Of specific guidelines for such a provision, is actually a correction of the accounting system previously executed. As amended make capital amounts accounting is more complex, but reflects the income and expense ratio accounting principles, because we have to avoid borrowing costs when the borrower is not used in the construction of the related assets and for other purposes also may be credited to the cost of that asset capitalization. However, under the current loan system, the funds are often included the establishment of specific borrowings corporate account, and the exact time of the use of funds may not determine borrowing costs or gains, so that had been produced prior to the actual payment of the assets . According to the conditions laid down by our specific criteria, such borrowing costs can not be capitalized, but it is also a special borrowing cost, and how to handle it? When our loan system improvement, that is, when the funds credited to the corporate account the actual needs of the enterprise, it does not appear before the actual use of the loan, the enterprise should bear the borrowing costs when the cost can be conditions meet the criteria to be capitalized. The conditions prescribed by the capitalization of borrowing costs in IAS 23 is actually consistent with the requirements of specific guidelines, but the basis of such a request is: given loans loans only established indicators than once assigned to the enterprises in the bank account, The actual paid directly by the bank. So not appear enterprises use loans before interest expense and, therefore, there will be no problem mentioned earlier.

About the scope of the capitalization of borrowing costs, IAS 23 provisions, as can choose the accounting treatment, the capitalization of borrowing costs requirements: Where are directly attributable to qualifying assets purchase. Construction or production of borrowing costs should be through the capitalization of part of the cost of that asset, that is to be capitalized. Here "can be directly attributed to the" mean borrowing costs that can be avoided if the expenditure on the asset does not occur. "Qualifying assets" refers to the need to go through quite a long time to achieve the use or sale of assets, such as some inventory, manufacturer, power generation facilities and investment and real estate. Visible, the "capital" in fact related to borrowing costs directly charged to the cost of a particular asset.

Of specific standards require capitalization of borrowing costs should be specific borrowings and interest, discount or premium amortization and exchange differences. Visible, specific guidelines to allow the capitalization of borrowing costs is limited to that specific borrowings used for the acquisition or construction of fixed assets of the borrower. With IAS 23, provisions can be directly attributable to the acquisition of a qualifying asset, construction or production of borrowing costs has a significant difference compared to "qualifying assets" may take quite a long time to be able to reach sales status of inventories, factories, power generation facilities and investment real estate. Therefore, the cost of the two standards require grant the capitalization of borrowing in the textual representation of different capitalization range of the difference, and this difference is actually the most important differences between the two standards., Of specific standards require the approval of capital The range of borrowing costs is much smaller.
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