construction contracts, borrowing cost, inventories

8/18/2019 construction contracts, borrowing cost, inventories

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Construction Contracts,Borrowing Cost, Inventories

AMADILA AIGAR 1210534003ATIA! GAL"! #ILA$DRA1210534013


2/11


3/11

+o'ution To te etent tat an entity borrow! und! !#ecifcally or obtaining a

'ualiying a!!et, it determine! te amount o borrowing co!t eligible orca#italiation a! te actual borrowing co!t! incurred on tat borrowingduring te #eriod, le!! any ine!tment income on te tem#oraryine!tment o to!e borrowing%

n ti! #roblem, to te etent tat an entity borrow! und! !#ecifcallyor te #ur#o!e o obtaining a 'ualiying a!!et, te entity !alldetermine te amount o borrowing co!t! eligible or ca#italiation a!

te actual borrowing co!t! incurred on tat borrowing during te #eriodle!! any ine!tment income on te tem#orary ine!tment o to!eborrowing! (34 2%12)%

Te fnancing arrangement! or a 'ualiying a!!et may re!ult in anentity obtaining borrowed und! and incurring a!!ociated borrowing

co!t! beore !ome or all o te und! are u!ed or e#enditure! on te'ualiying a!!et% n !uc circum!tance!, te und! are oten tem#orarilyine!ted #ending teir e#enditure on te 'ualiying a!!et% ndetermining te amount o borrowing co!t! eligible or ca#italiationduring a #eriod, any ine!tment income earned on !uc und! i!deducted rom te borrowing co!t! incurred (342%1)


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+o'ution

$ million

20092010

5ro!! borrowing co!t!

1 January to 1 ecember 2009 ($600 m 10*)

60

1 January to 1 ecember 2010 ($600 m 10*)

60

Le!!/ ne!tment ncome

1 January to 1 ecember 2009 ($200 m -*)

(10)

1 January to 1 ecember 2010 ($200 m -*)

(10)

-0 -0


5/11

+o'ution

$ million 2009 2010

&o!t o a!!et!/

O#ening balance 0 +-0

#enditure incurred +00 200

7orrowing ci!t ca#italied -0 -0

nding balance +-0 800


6/11

Case +tu- .*/

ou are auditing :TL;! fnancial !tatement! or te year ended 0 4e#tember2008% Te ollowing ia an ecange between or te

lo!!e! we !u@ered% :e are al!o contacting oter buyer! in te ?4 to try to !ellte!e !#ecialie! good!% 4ome o tem may be willing to ta"e te inentorie!altoug we don;t "now weter ti! will a##en at ti! moment%

.e'uired/

3! te auditor o :TL, e#lain! to


7/11

+o'utionnentorie! are a!!et!/

a) eld or !ale in te ordinary cour!e o bu!ine!!B

b) in te #roce!! o #roduction or !uc !aleB orc) in te orm o material! or !u##lie! to be con!umed in te

#roduction #roce!! or in te rendering o !erice! (342%6)

nentorie! encom#a!! good! #urca!ed and eld or re!ale including,or eam#le, mercandi!e #urca!ed by a retailer and eld orre!ale, or land and oter #ro#erty eld or re!ale% nentorie! al!oencom#a!! fni!ed good! #roduced, or wor" in #rogre!! being#roduced, by te entity and include material! and !u##lie! awaitingu!e in te #roduction #roce!! (34 2%C)


8/11


9/11

%ro&'e( 10*1

n >a!e o it! real e!tate deelo#ment #roAect, 37& i! going to buildeigt identical +0D!toried re!idential building!% 37& a! awarded &an tecon!truction contract to build te re!idential building! becau!e &an !ubmittedte lowe!t tender% 4oon ater &an a! commenced te con!truction wor", 37&ma"e! an announcement to #roceed immediately to >a!e o it! real e!tatedeelo#ment #roAect !o a! to beneft rom te recent une#ected economicboom%

n >a!e o te deelo#ment, 37& i! going to build anoter eigt

identical +0D!toried re!idential building! wo!e de!ign it eactly te !ame a!tat or te >a!e building!% 4i con!truction com#anie!, including &an, ae!ubmitted teir tender!, and &an i! eentually awarded te con!tructioncontract due to o@ering te lowe!t tender%

.e'uired/

etermine weter &an !ould treat te con!truction contract! or >a!e and >a!e deelo#ment a! !e#arate con!truction contract! or a !inglecon!truction contract%


10/11

+o'ution3 con!truction contract i! a contract !#ecifcally negotiated or te

con!truction o an a!!et or a combination o a!!et! tat are clo!elyinterrelated or interde#endent in term! o teir de!ign, tecnology andunction or teir ultimate #ur#o!e or u!e (34 11%)%

7a!ed on 34 11, combining and !egmenting con!truction contract!u!ually a##lied !e#arately to eac con!truction contract% 3n entityneed! to a##ly 34 11 to te !e#arately identifable com#onent! o a!ingle contract or to a grou# contract! togeter in order to reEect te!ub!tance o a contract or a grou# o contract!%

:en a contract coer! a number o a!!et!, te con!truction oeac a!!et !all be treated a! a !e#arate con!truction contract wen(34 11%C)

a% !e#arate #ro#o!al! ae been !ubmitted or eac a!!etB

b% eac a!!et a! been !ubAect to !e#arate negotiation and tecontractor and cu!tomer ae been able to acce#t or reAect tat#art o te contract relating to eac a!!etB

c% te co!t! and reenue! o eac a!!et can be identifed%


11/11

+o'ution Te con!truction contract or >a!e !ould be treated a!

!e#arate con!truction contract rom te con!truction contract!

or >a!e becau!e tere are tree condition! ba!ed on 34 11/

1% Tere !ould be !e#arate #ro#o!al! or >a!e deelo#mentand or >a!e deelo#ment%

2% Te con!truction or >a!e wa! negotiated a! a !inglecontract in a !ingle tender, wile tere i! anoter #roAect

wic i! >a!e !oon ater &an a! commenced tecon!truction wor"% 4o te con!truction >a!e and >a!e were !ubAect to !e#arate negotiation%

% Te co!t! and reenue! o con!tructing >a!e deelo#mentand >a!e deelo#ment can be !e#arately identifed%

construction contracts, borrowing cost, inventories

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