Capitalisation of interest (for the @CFA Level 1 exam) walks you through an exam-style question exploring the treatment of borrowing costs under IFRS and US GAAP
Hi, thanks for the video! One question: when looking at the cumulative debt at the end of year 3, is it right to expect that principal will then be $ 10m*(1+0,05)^3? Then, I would assume that the difference between Carried amount of the building and the Debt contracted is registered each year in the income statement as Financial expense, correct?
Hi, sorry for the late response. I was on holiday :) The interest would not accumulate on the debt. We are assuming the bond pays regular coupon/interest on an annual basis, so no need for that interest to added to the principal amount.
Hi Wojciech If I am not wrong that distinction between IFRS and USGAPP is the same for financial assets, in IFRS we capitalize trans costs while in USGAAP we expend that trans cost.
Generally yes, but under IFRS you would not capitalise transaction costs if the instrument is measured at fair value through profit and loss. For the other categories, transaction costs are indeed capitalised.
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@@letmeexplaincfa Do not listen to this guy, your rhythm is perferct, that guy is not considering that the audience could be not English speakers. So in order to capture the most audience possible keep explaining in that way, when the pronunciation of the sentences is clear there is always room to speed up for the English speakers. Great job.
