What are the differences in the amount of borrowing costs that can be capitalized under IFRS and US GAAP?

Under IFRS Standards, ABC capitalizes $50 ($60 – $10) of borrowing costs for the year. Under US GAAP, the amount capitalized is calculated by applying the rate of the specific borrowing to the average expenditure and is not reduced by the interest earned from the temporary investment of funds.

How long do you amortize financing costs?

GAAP sets the amortization period to the expected life of the loan which means the call or balloon date. For illustration purposes, seven years is used. If the loan is paid off early, any remaining balance of financing costs is expensed (recognized as a cost of business) at that time.

Why IFRS presents financial data differently than GAAP?

A major difference between GAAP and IFRS is that GAAP is rule-based, whereas IFRS is principle-based. With a principle based framework there is the potential for different interpretations of similar transactions, which could lead to extensive disclosures in the financial statements.

What does amortized cost mean?

Amortized cost is that accumulated portion of the recorded cost of a fixed asset that has been charged to expense through either depreciation or amortization. Depreciation is used to ratably reduce the cost of a tangible fixed asset, and amortization is used to ratably reduce the cost of an intangible fixed asset.

How are debt issuance costs amortized?

Under the new rules debt issuance costs are deducted from the outstanding balance of the obligation. Additionally, amortization of these costs is charged to interest expense. The effect of these changes is a higher imputed interest rate—which is one of the new items to be disclosed in the financial statements.

How do you amortize bond costs?

These costs are recorded as a deduction from the bond liability on the balance sheet. The costs are then charged to expense over the life of the associated bond, using the straight-line method. Under this amortization method, you charge the same amount to expense in each period over the life of the bonds.

What is the main difference between GAAP and IFRS?

The primary difference between the two systems is that GAAP is rules-based and IFRS is principles-based. This disconnect manifests itself in specific details and interpretations. Basically, IFRS guidelines provide much less overall detail than GAAP.

How are IFRS and GAAP similar?

Both US GAAP and IFRS recognize fixed assets when purchased, but their valuation can differ over time. US GAAP requires that fixed assets are measured at their initial cost; their value can decrease via depreciation or impairments, but it cannot increase.

How are transaction costs treated under IFRS?

Under IFRS, transaction costs are deducted from the carrying value of the financial liability and are not recorded as separate assets. Rather, they are accounted for as a debt discount and amortized using the effective interest method. Under U.S. GAAP, transaction costs are deferred as an asset and amortized over the term of the debt

What are the similarities between US GAAP and IFRS?

There are many similarities in US GAAP and IFRS guidance on financial statement presentation. Under both sets of standards, the components of a complete set of financial statements include a statement of financial position (balance sheet), a statement of profit or loss (income

How do you calculate borrowing costs capitalized under IFRS?

How do you calculate amortization period under GAAP?

GAAP sets the amortization period to the expected life of the loan which means the call or balloon date. For illustration purposes, seven years is used. If the financing costs for an equipment loan were $3,782, the amortization amount per month equals: Amortization Per Month = $45.02