Emma, a public limited company, is a sports organisation which owns several football and basketball teams....

 

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Emma, a public limited company, is a sports organisation which owns several football and basketball teams. It has a financial year end of 31 May 2019. Emma Ltd needs a new stadium to host sporting events which will be included as part of Emma's property, plant, and equipment. Emma Ltd commenced construction of a new stadium on 1 February 2019, and this continued until its completion which was after the year end of 31 May 2019. The direct costs were N$20 million in February 2019 and then N$50 million in each month until the year end. Emma Ltd has not taken out any specific borrowings to finance the construction of the stadium, but it has incurred finance costs on its general borrowings during the period, which could have been avoided if the stadium had not been constructed. Emma Ltd has calculated that the weighted average cost of borrowings for the period 1 February to 31 May 2019 on an annualised basis amounted to 9% per annum Required: 1.4 Discuss how the above event would be shown in the financial statements of 5 Emma Ltd under International Financial Reporting Standards. Emma, a public limited company, is a sports organisation which owns several football and basketball teams. It has a financial year end of 31 May 2019. Emma Ltd needs a new stadium to host sporting events which will be included as part of Emma's property, plant, and equipment. Emma Ltd commenced construction of a new stadium on 1 February 2019, and this continued until its completion which was after the year end of 31 May 2019. The direct costs were N$20 million in February 2019 and then N$50 million in each month until the year end. Emma Ltd has not taken out any specific borrowings to finance the construction of the stadium, but it has incurred finance costs on its general borrowings during the period, which could have been avoided if the stadium had not been constructed. Emma Ltd has calculated that the weighted average cost of borrowings for the period 1 February to 31 May 2019 on an annualised basis amounted to 9% per annum Required: 1.4 Discuss how the above event would be shown in the financial statements of 5 Emma Ltd under International Financial Reporting Standards.

Answer rating: 100% (QA)

As per IAS 23 Borrowing Cost any borrowing cost incurred for construction acquisition or production ... View the full answer