Journal ArticleDOI
Capitalization of Interest Costs
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In this article, the authors examined the nature of the costs of fixed assets that can be capitalized and concluded that there are finely balanced arguments in favour and against capitalization of interest costs, and the requirements that are applicable to those enterprises that do not capitalize borrowing costs are aimed at ensuring a consistent capitalization policy is adopted within the enterprise.Abstract:
Capitalization of interest, from the financial stand-point, refers to the cost associated with the borrowing of funds, or obtaining a loan in order to finance the acquisition of certain fixed assets. The focal point of this paper is an examination of the nature of the costs of fixed assets that can be capitalized Consequently, discussions revolve around the meaning of capitalization of interest or borrowing costs; steps that are involved in the computation of capitalization of interest costs; the arguments in favour and against interest costs capitalization. Technical difficulties or problems that confront an organization‘s policy on capitalization of interest costs such as the identification of the amount of financing costs that should be capitalized are also discussed. The paper concludes that there are finely balanced arguments in favour and against capitalisation. Furthermore, enterprises should be allowed to decide whether or not to capitalize their borrowing costs on fixed assets that take a substantial period of time to bring into service; and the requirements that are applicable to those enterprises that do not capitalize borrowing costs are aimed at ensuring that a consistent capitalization policy is adopted within the enterprise. Again, through disclosure the impact of capitalization on the results and financial position of the enterprise are understood; and that there is comparability between enterprises capitalizing interest costsread more
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会計理論の構造 = Accounting theory
TL;DR: In this article, the authors describe a scenario in which a group of people are trying to find a suitable home for a理理論 (i.e.
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How does the FASB make decisions? A descriptive study of agenda-setting and the role of individual board members
TL;DR: In this article, the authors provide descriptive evidence on how the Financial Accounting Standards Board (FASB) sets Generally Accepted Accounting Principles (GAAP) based on 211 financial accounting standards issued between 1973 and 2014, summarize the reasons that the FASB adds or removes projects from its agenda, the entities most frequently bringing issues to the FAsB's attention, and commonly recurring topics across different standards over time.
References
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会計理論の構造 = Accounting theory
TL;DR: In this article, the authors describe a scenario in which a group of people are trying to find a suitable home for a理理論 (i.e.
Book
Accounting for the Cost of Interest
TL;DR: The definition of interest in financial accounting differs from its economics definition in two fundamental respects as discussed by the authors : interest refers only to the charge for using debt capital; accountants do not record a charge for the use of equity capital.
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