Capitalisation of interest (for the @CFA Level 1 exam)

[@rowanbrown6376]

You are a great teacher - these videos are fantastic, thank you

[@SajivvDoley]

4:07 can you please tell me why did you not compound the 5% IR in the second and third year? The 10mil amount should build year on year by 5% of the previous year.

[@samersubei4404]

super helpful, thanks for these videos

[@letmeexplaincfa]

Thanks so much!

[@saadkundi1329]

Great video! I had a question regarding the income earned part under IFRS. In your example, you had mentioned the income from investments to be 300k, which we offset against the asset. If the income from investment was 1.6 million, but we have only capitalized 1.5 million, will we offset 1.5 million of the income against the asset and the remaining 100k to the p&l. Thanks in advance!

[@letmeexplaincfa]

It's quite unlikely that you would earn more on the temporary investment of these funds than the interest charged but should this be the case, the surplus would go to P&L, like you said :)

[@lucatintor4896]

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.

[@letmeexplaincfa]

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.

[@lucatintor4896]

@@letmeexplaincfa yes sorry I mean ammortized cost and FVTOCI

[@valentintomov5393]

Hello, if the company is reporting under US GAAP and capitalize some interest paid associated with long live asset, where do this interest paid will be reflected in cash flow statement? US Gaap requires that interest paid is showing in operating cash flow, is that true?

[@letmeexplaincfa]

Hi, your book states that the portion of interest that is capitalised appears under investing cash flows (together with the other elements of the asset's cost).

[@rohitpatidar2740]

sir do you have full course

[@letmeexplaincfa]

I don't have any other content expect what's on this channel. I have recently launched a feature that allows supporters to joing the channel for a fee, which gives access to a growing library of supporter-exclusive content. This is growing at around 3 - 4 new videos per week.

[@rohitpatidar2740]

so helpful

[@letmeexplaincfa]

Thank you!

[@manjitkr.5317]

Nicely explained❤❤

[@letmeexplaincfa]

Thank you!

[@riccardobonani8406]

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?

[@letmeexplaincfa]

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.

[@alishabeerali5709]

super😍😍😍

[@letmeexplaincfa]

Thank you🙏 I am glad you are finding the content valuable!

[@MouliBeesetti]

explanation is good but slow... good to watch at 1.25 X playback speed

[@letmeexplaincfa]

Thanks for the feedback. Will try to be quicker next time😉 … but then, I may just be a bit slow in reality so 1.25x speed is probably a good idea👍

[@lucatintor4896]

@@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.

[@nicolaschauvin1029]

I agree speed is good , thanks for the videos !

[@typicalgamer5560]

@@letmeexplaincfa Ignore what he said please, lol.

[@letmeexplaincfa]

@@typicalgamer5560😊