GUIDELINES ON HOW TO STUDY F.A.R.
SUBJECT
Wednesday, November 24, 2021 8:53 AM
1. Know the applicable Accounting Standards
2. Know the Scope of the applicable Accounting Standards
3. Know the important Definition of Terms
4. Know the Recognition (a) Initial and; (b) Subsequent
5. Know the Measurement (a) Initial and; (b) Subsequent
6. Know the essential Journal Entries
7. Know the Presentation
8. Know the Disclosure
PAS 23 Page 1
, PAS 23 BORROWING COSTS
Monday, November 22, 2021 9:58 AM
CORE PRINCIPLE
Borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalized (form part of the cost) as cost of that asset. Other borrowing costs
are expensed when incurred. (PAS 23.1)
Borrowing costs (interest or finance costs) are interest and other costs incurred by an entity in
connection to the borrowing of funds.
Borrowing costs include the following:
a. Interest expense on financial liabilities or lease liabilities computed using the
effective interest method; PFRS Financial Instruments
b. Finance charges in respect of finance leases; PFRS Leases; and
c. Exchange differences on foreign borrowings that are regarded as an adjustment to
interest costs.
Borrowing cost do not include actual or imputed cost of equity or capital.
Qualifying asset is an "asset that necessarily takes a substantial period of time to get ready for
its intended use or sale." (PAS 23.5)
Examples:
a. Inventories that take a long period of time to produce
b. PPE (e.g. bldg., bearer plant) that takes a long period of time to construct or to get
ready for its intended use
c. Investment property, measured under the cost model (e.g. bldg.) that takes a long
period of time to construct
d. Intangible assets that take a long period of time to develop
Depending on the circumstances, any of the following may be qualifying assets: (BIMPII)
a. Bearer plants
b. Inventories
c. Manufacturing plants
d. Power generation facilities
e. Intangible assets
f. Investment properties measured under cost model
The following are NOT qualifying assets;
a. Financial asset
b. Inventories that are routinely produced over a short period of time or are mass-
produced on a repetitive basis
c. Assets that are ready for their intended use or sale when acquired
d. Assets measured at fair value.
PAS 23 Page 2
SUBJECT
Wednesday, November 24, 2021 8:53 AM
1. Know the applicable Accounting Standards
2. Know the Scope of the applicable Accounting Standards
3. Know the important Definition of Terms
4. Know the Recognition (a) Initial and; (b) Subsequent
5. Know the Measurement (a) Initial and; (b) Subsequent
6. Know the essential Journal Entries
7. Know the Presentation
8. Know the Disclosure
PAS 23 Page 1
, PAS 23 BORROWING COSTS
Monday, November 22, 2021 9:58 AM
CORE PRINCIPLE
Borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalized (form part of the cost) as cost of that asset. Other borrowing costs
are expensed when incurred. (PAS 23.1)
Borrowing costs (interest or finance costs) are interest and other costs incurred by an entity in
connection to the borrowing of funds.
Borrowing costs include the following:
a. Interest expense on financial liabilities or lease liabilities computed using the
effective interest method; PFRS Financial Instruments
b. Finance charges in respect of finance leases; PFRS Leases; and
c. Exchange differences on foreign borrowings that are regarded as an adjustment to
interest costs.
Borrowing cost do not include actual or imputed cost of equity or capital.
Qualifying asset is an "asset that necessarily takes a substantial period of time to get ready for
its intended use or sale." (PAS 23.5)
Examples:
a. Inventories that take a long period of time to produce
b. PPE (e.g. bldg., bearer plant) that takes a long period of time to construct or to get
ready for its intended use
c. Investment property, measured under the cost model (e.g. bldg.) that takes a long
period of time to construct
d. Intangible assets that take a long period of time to develop
Depending on the circumstances, any of the following may be qualifying assets: (BIMPII)
a. Bearer plants
b. Inventories
c. Manufacturing plants
d. Power generation facilities
e. Intangible assets
f. Investment properties measured under cost model
The following are NOT qualifying assets;
a. Financial asset
b. Inventories that are routinely produced over a short period of time or are mass-
produced on a repetitive basis
c. Assets that are ready for their intended use or sale when acquired
d. Assets measured at fair value.
PAS 23 Page 2
