Vietnam Accounting Standards No. 16 "Borrowing Costs", which was issued together with Decision No. 165/2002 / QD-BTC dated 31/12/2002 of the Minister of Finance.
Borrowing costs are capitalized: Borrowing costs are eligible to be recognized in the value of assets as prescribed by the relevant accounting standards
eligible assets capitalized borrowing costs
Under standard accounting Vietnam No. 16 - borrowing costs, assets in the investment and construction process that involved borrowing costs may be capitalized (assets eligible capitalization) to have time to build over 12 months. Circular 200 changes of interest requirements of the separate loans to serve the construction of fixed assets, real estate investment even capitalized construction period of less than 12 months. This Circular does not specify a minimum time to build assets eligible for capitalization.
Circular 200 additional regulations for the construction contractor and shipbuilder when borrowing interest is to serve the construction, building construction, property customers capitalization is not allowed. This means that borrowing costs capitalization is not allowed in inventory
Determine borrowing costs capitalized
- Where separate loans used only for the purpose of investment in construction or production of a resource the progress, the borrowing costs eligible for capitalization unfinished assets will be determined as the actual borrowing costs incurred from loans minus (-) the income arising from investment activities temporary investment of these loans;
- Earnings arising from the temporary investment of specific borrowings pending is used in the purpose of acquiring assets in progress must be deducted against the borrowing costs incurred while capital goods;
- In case of general borrowings, including use for purposes of the construction or production of an asset in progress, then the borrowing costs eligible for capitalization in each accounting period is determined in proportion to the costs capitalized weighted average cumulative incurred for the construction or production assets. Capitalization rate is calculated in proportion to the weighted average interest rate of borrowings outstanding during the period, except for separate loans serve a purpose unfinished assets. Borrowing costs capitalized during a period should not exceed the total borrowing costs incurred during that period;
- If there arise a discount or premium when issuing bonds must be adjusted loan interest by allocating the value of the discount or premium and adjust the capitalization rate accordingly. Loan interest and amortization of discount or premium capitalized in each period must not exceed the actual interest incurred and amortized discount or premium during that period.
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