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S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Content  Introduction  Scope  Definition  Accounting Treatment  Disclosure

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Introduction  Previous standard was SLAS 20. New standard came into effect from  This standard prescribe the accounting treatment for borrowing cost  Borrowing costs recognize as Directly attributable to asset Expense in the period

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Scope  Apply on borrowing cost  Does not deal with actual or imputed cost of equity.  Not required to apply on a qualifying asset measured at fair value e.g. biological asset  Inventories produced on large quantities on a repetitive basis

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Definition Borrowing Cost  Borrowing cost are interest and other costs incurred by an enterprise in connection with the borrowing of funds.

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST 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

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Borrowing cost can classified as follows Borrowing Cost Related withRelated with other Qualifying assetborrowing cost

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST 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

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Recognition Capitalize  Directly attributable to acquisition, construction or production of a qualifying asset as part of cost Expense  Recognize other borrowing cost as an expense in the period in which it incurs

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Borrowing cost eligible for capitalization  Capitalization rate  Commencement of capitalization  Suspension of capitalization  Cessation of capitalization  Partial Completion  Impairment

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST Disclosure  The amount capitalized during the period  The capitalization rate used to determine the borrowing cost

S RI L ANKA A CCOUNTING S TANDARDS – LKAS 23 B ORROWING C OST THANK YOU