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Accounting Standards. In certain circumstances, the amount of the write-down or write-off is written back in accordance with those other International Accounting Standards.

Commencement of Capitalisation

The capitalisation of borrowing costs as part of the cost of a qualifying asset should commence when:

(a) expenditures for the asset are being incurred; (b) borrowing costs are being incurred; and

(c) activities that are necessary to prepare the asset for its intended use or sale are in progress.

Expenditures on a qualifying asset include only those expenditures that have resulted in payments of cash, transfers of other assets or the assumption of interest-bearing liabilities. Expenditures are reduced by any progress payments received and grants received in connection with the asset (see IAS 20, Accounting for Government Grants and Disclosure of Government Assistance). The average carrying amount of the asset during a period, including borrowing costs previously capitalised, is normally a reasonable approximation of the expenditures to which the capitalisation rate is applied in that period.

The activities necessary to prepare the asset for its intended use or sale encompass more than the physical construction of the asset. They include technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits prior to the commencement of the physical construction. However, such activities exclude the holding of an asset when no production or development that changes the asset's condition is taking place. For example, borrowing costs incurred while land is under development are capitalised during the period in which activities related to the development are being undertaken. However, borrowing costs incurred while land acquired for building purposes is held without any associated development activity do not qualify for capitalisation.

Suspension of Capitalisation

Capitalisation of borrowing costs should be suspended during extended periods in which active development is interrupted.

Borrowing costs may be incurred during an extended period in which the activities necessary to prepare an asset for its intended use or sale are interrupted. Such costs are costs of holding partially completed assets and do not qualify for capitalisation. However, capitalisation of borrowing costs is not normally suspended during a period when substantial technical and administrative work is being carried out. Capitalisation of borrowing costs is also not suspended when a temporary delay is a necessary part of the process of getting an asset ready for its intended use or sale. For example ,capitalisation continues during the extended period needed for inventories to mature or the extended period during which high water levels delay construction of a bridge, if such high water levels are common during the construction period in the geographic region involved.

Cessation of Capitalisation

Capitalisation of borrowing costs should cease when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

An asset is normally ready for its intended use or sale when the physical construction of the asset is complete even though routine administrative work might still continue. If minor modifications ,such as the decoration of a property to the purchaser's or user's specification, are all that are outstanding, this indicates that substantially all the activities are complete.

When the construction of a qualifying asset is completed in parts and each part is capable of being used while construction continues on other parts, capitalisation of borrowing costs should cease when substantially all the activities necessary to prepare that part for its intended use or sale are completed.

A business park comprising several buildings, each of which can be used individually is an example of a qualifying asset for which each part is capable of being usable while construction continues on other parts. An example of a qualifying

asset that needs to be complete before any part can be used is an industrial plant involving several processes which are carried out in sequence at different parts of the plant within the same site, such as a steel mill.

Disclosure

The financial statements should disclose: (a) the accounting policy adopted for borrowing costs;

(b) the amount of borrowing costs capitalised during the period; and

(c) the capitalisation rate used to determine the amount of borrowing costs eligible for capitalization .

Transitional Provisions

When the adoption of this Standard constitutes a change in accounting policy, an enterprise is encouraged to adjust its financial statements in accordance with IAS 8, Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies. Alternatively, enterprises following the allowed alternative treatment should capitalise only those borrowing costs incurred after the effective date of the Standard which meet the criteria for capitalisation.

After a long period of effective implementation of International Accounting Standards, the standardized accounting systerm has been established ,but at the same time, owing to the complex environment in the actual work which produce a lot of issues, the current calls for reform of International Accounting Standards more and more .Here to talk about the the obstacles in the application and come up with coping strategies accordingly by the International Accounting Standards Board.

The International Accounting Standards Board agreed to include borrowing costs within the short-term convergence project with US GAAP at the joint meeting with the US Financial Accounting Standards Board in April 2004. In February 2006 both bodies agreed on a memorandum of understanding (MOU) that reaffirms the boards' shared objective of developing high quality,common accounting standards.The MOU is set in the context of the'roadmap'discussed in April 2005 by the European Commission and the US Securities and Exchange Commission (SEC) for the removal

of the reconciliation requirement for non-US companies that use International Financial Reporting Standards in the US. Under the MOU, the goal by 2008 is to complete or substantially complete work in certain areas that include borrowing costs.

The objective of the short-term convergence project is to focus on differences that can be resolved in a relatively short time and can be addressed outside current and planned major projects.

Elimination of one of the two existing options

The proposed amendments to the requirements in IAS 23 for the accounting treatment for borrowing costs result from the board's consideration of SFAS 34, Capitalization of lnterest Cost.They are principally concerned with the elimination of one of the two treatments that exist for borrowing costs directly attributable to the acquisition,construction or development of qualifying assets (assets that necessarily to take a substantial period of time to get ready for their intended use or sale). Capitalisation of those borrowing costs would be required.Immediate recognition as an expense of those borrowing costs would be prohibited.

In making that decision ,the board considered whether to require capitalisation or immediate recognition as an expense of borrowing costs and how the capitalisation rate should be determined.The framework defines historical cost as ¡°the fair value of the consideration given to acquire [an asset] at the time of its acquisition¡±.The total historical cost of an asset that is developed over a period of time is initially recognised at the point when the asset meets the conditions to be ready for its intended use or sale.The cost of the asset must include all the costs necessarily incurred up to that point.

The cost of a qualifying asset may be formed by the accumulation of partial costs the expenditures of which were produced in different times over a substantially long period.ln order to determine the qualifying asset's historical cost (ie, the fair value of the consideration given at the time of initial recognition of the asset, when the asset is ready for its intended use or sale), we must bring the nominal amount of these expenditures forward to the time of the asset's initial recognition by computing the