THE Securities and Exchange Commission (SEC) has granted property firms more time to implement an accounting standard governing the treatment of borrowing costs, citing the need to provide relief to the industry during the financial crisis.
In a memorandum circular on its website, the SEC said the extension applies to accounting treatments raised by the Philippine Interpretation Committee and the International Financial Reporting Standards Interpretations Committee concerning Over Time Transfer of Constructed Goods.
The accounting treatment of Over Time Transfer of Constructed Goods is governed by International Accounting Standard (IAS) 23 – Borrowing Costs. IAS 23 lays down how to account for borrowing costs directly incurred in building “qualifying assets” — those that take a substantial amount of time to build.
The original compliance deadline was Jan. 1, 2021, but has been moved back three years.
“The SEC believes that the deferral will give more than enough time to (the) real estate industry to further evaluate and explore options to resolve the above remaining implementing issues and help the industry to mitigate the impact of COVID-19 crisis,” the SEC said in its memorandum circular.
Property companies typically borrow to complete a development, and borrowing costs can either be expensed — going directly as a cost immediately recognized in the profit-and-loss statement — or capitalized.
The industry sent two letters to the SEC — the first in September brought up implementation issues, while a second in December sought an extension. — Angelica Y. Yang