IAS 23 requires companies to capitalize borrowing costs directly attributable to the acquisition, construction or production of an asset into the cost of an asset.Previously, accounting standard required all interest costs to be written off as an expenses.Discuss which of these alternatives increases the comparability of accounting? Is interest a product cost or period.You might like consider the acquisition of an identical asset in the following situations:

• An all equity company
• A higher risk company(i.e a company with a higher borrowing rate
• The use of fair value accounting rather than cost accounting to established the amount of the asset to be recognized in the balance sheet.

Answer rating: 100% (QA)

Discussing the Alternatives in IAS 23 IAS 23 deals with the capitalization of borrowing costs that are directly attributable to the acquisition construction or production of a qualifying asset Prior t... View the full answer