IAS 23 Borrowing Costs requires that borrowing costs directly attributable to the acquisition, construction or production of a ‘qualifying asset’ (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are to be capitalized or included in the cost of the asset once they meet certain conditions.
The functional budget is one that relates to any of the functions of an organization. The number of functional budgets depends upon the size and nature of business. The following are the commonly used:
The current assets turnover ratio ascertains the efficiency with which current assets are used in a business. This ratio is strongly associated with the efficient utilization of cash, receivables, and inventory. A higher value of this ratio indicates greater circulation of current assets while a low ratio indicates a stagnation of the flow of current assets.
A flexible budget is a budget that takes into account changes in sales volume and other cost driver activities.
The budget incorporates the effects on each cost and revenue as a result of the change in activity. It determines the variability of the cost along with the level of activity, which will be then used as a control tool. The aim of this budget is to control the cost.