{"id":8731,"date":"2015-05-20T07:13:18","date_gmt":"2015-05-20T05:13:18","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=8731"},"modified":"2015-05-17T07:13:46","modified_gmt":"2015-05-17T05:13:46","slug":"borrowing-costs-included-within-the-cost-of-a-ppe-item","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/borrowing-costs-included-within-the-cost-of-a-ppe-item\/","title":{"rendered":"Borrowing costs included within the cost of a PPE item"},"content":{"rendered":"
The item within your property, plant and equipment where you\u2019d use borrowing is something you\u2019re building over time. When you buy an asset which costs a lot, you use a finance lease, however what if you\u2019re building something an asset which evidently is also costly (hence it also takes a longer period) and you\u2019ve actually taken a loan from the bank to finance the building?<\/div>\n

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If the loan is used for only financing the building, one may argue that the interest expense for instance is an expense you would not incur had you not decided to build yourself something and thus should be included within the cost price of the asset. In fact, it\u2019s a valid argument and in some accounting frameworks it is in fact allowed, just up to the point where the financing is no longer required, for instance once the building is ready and you\u2019re still paying back the loan. Once the asset built is in use, the financing is no longer related to the building as a process and thus interest expense from that point onwards is your regular expense.<\/div>\n
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However, I would like to point out that if the case may be, first things first, consult with your locally applied accounting framework. As it is, not all accounting frameworks allow for the borrowing expenses to be included within the cost price of the asset (or it\u2019s a choice). Be the reasons as they may for such considerations from the local regulators, but if it\u2019s not allowed, you ought not to opt for the choice.<\/div>\n","protected":false},"excerpt":{"rendered":"

The item within your property, plant and equipment where you\u2019d use borrowing is something you\u2019re building over time. When you buy an asset which costs a lot, you use a finance lease, however what if you\u2019re building something an asset which evidently is also costly (hence it also takes a longer period) and you\u2019ve actually […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[54],"tags":[],"class_list":["post-8731","post","type-post","status-publish","format-standard","hentry","category-1-5-2-initial-recognition"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t